Trading Rules Of China Financial Futures Exchange

Posted By Steve On Tuesday, May 11th, 2010 With 0 Comments

Chapter I General Provisions

Article 1 These Measures are formulated in accordance with the Trading Rules of China Financial Futures Exchange for the purpose of strengthening the management of risks involved in futures trading, protecting the legitimate rights and interests of futures trading participants, and safeguarding smooth trading on the China Financial Futures Exchange (hereinafter referred to as the Exchange).

Article 2 For the purpose of risk management, the Exchange adopts a margin system, a price limit system, a position limit system, a large position reporting system, a forced liquidation system, a forced position reduction system, a settlement guarantee fund system and a risk warning system.

Article 3 The Exchange, members and clients shall comply with these Measures.

Chapter II Margin System

Article 4 The Exchange adopts a margin system. The margin is classified into settlement reserve and trading margin.

Article 5 The minimum trading margin for stock index futures contracts shall be 10%. Upon the occurrence of any of the following circumstances during trading sessions, the Exchange may adjust the level of trading margin in light of market risk conditions, and at the same time, report to China Securities Regulatory Commission (hereinafter referred to as the CSRC):

(1) only buy orders or only sell orders quoted at the daily price up/down limit (hereinafter referred to as one-sided market);

(2) official holidays;

(3) a noticeable change in market risk as considered by the Exchange; or

(4) other circumstances as recognized by the Exchange.

Article 6 Where the Exchange adjusts the level of trading margin for a futures contract, it shall clear all the positions of the said contract at the time of clearing on the same day based on the new margin level.

Article 7 The settlement reserve shall be governed by the Detailed Clearing Rules of China Financial Futures Exchange.

Chapter III Price Limit System

Article 8 The Exchange adopts a price limit system through a circuit breaker or daily price up/down limit. The Exchange can revise the range of circuit breaker and daily price up/down limit for a futures contract based on the market risk conditions.

Article 9 The circuit breaker for a stock index futures contract shall be ±6% of the previous trading day’s settlement price, and the daily price up/down limit shall be ±10% of the settlement price of the previous trading day. On the last trading day, the circuit breaker shall not be applicable while the daily price up/down limit shall be ±20% of the settlement price of the previous trading day.

Article 10 After the market opening on each trading day, if the quotation price for a stock index futures contract touches the circuit breaker price and lasts for 5 minutes, the circuit breaker will be triggered for the contract. The so-called “the quotation price touches the circuit breaker price and lasts for 5 minutes” refers to the circumstances where there are only buy orders or only sell orders quoted at the circuit breaker price, or, transactions are executed whenever there is a sell order or buy order but all orders are quoted at the circuit breaker price.

(1) within the five minutes following the triggering of the circuit breaker, buy orders and sell orders for the contract will continue to be matched and executed within the range of the circuit breaker price. After the said five minutes, the circuit breaker will cease to be in effect and the daily price up/down limit price will come into effect.

(2) if the morning session ends before the quotation price for the stock index futures contract lasts for five minutes after touching the circuit breaker price, circuit breaker inspection will be restarted after the opening of the afternoon session.

(3) if the morning session ends before the circuit breaker is in effect for five minutes, the circuit breaker will cease to be in effect. After the opening of the afternoon session, the daily price up/down limit will come into effect.

(4) the circuit breaker shall not apply during the 30 minutes before the closing of the market and any circuit breaker already activated will be terminated.

(5) the circuit breaker may be triggered only once a day.

Article 11 Orders for the futures contract that are quoted at the circuit breaker price or the daily price up/down limit shall be matched on the principles of liquidation priority and time priority.

Article 12 The one-sided market refers to the circumstances where there are only buy orders or only sell orders quoted at the daily price up/down limit during the five minutes prior to the closing of the market, or transactions are executed whenever there is a buy order or sell order but all orders are quoted at the daily price up/down limit.

Article 13 Where a one-sided market occurs during the trading of a futures contract on a certain trading day (hereinafter referred to as Dt day, while the trading day preceding Dt day is referred to as Dt-1 day, the trading day following Dt day referred to as Dt+1 day, so on and so forth), if Dt day is the last trading day, such contract will be delivered directly; if Dt day is not the last trading day, the Exchange will take appropriate measures in accordance with the following specific circumstances:

(1) in the case that the cumulative advance or decline on Dt day and Dt-1 day is less than 16%, at the time of clearing on Dt day, the trading margin for the said contract shall be 12%, and if the original level is higher than 16%, the original level will prevail.

(2) in the case that the cumulative advance or decline on Dt day and Dt-1 day is equivalent to or greater than 16%, the Exchange may in its discretion adopt one or more risk control measures as follows in line with market conditions: raising trading margin level, restricting the opening of new positions, restricting the withdrawal of funds, ordering a close-out of positions within a specified time limit, forcing liquidation, suspending trading, adjusting the daily price up/down limits, forcing reduction of positions, or other risk control measures.

Article 14 If the one-sided market does not occur on Dt+1 day, at the time of clearing on Dt+1 day, the normal level of trading margin shall be resumed.

Chapter IV Position Limit

Article 15 The Exchange adopts a position limit system. The position limit refers to the maximum lots of one-side positions owned or controlled by a member or client in any particular contract, as prescribed by the Exchange.

Article 16 If a client established positions at different members, the aggregate positions owned or controlled by the said customer in any particular contract shall not exceed the position limit allowed for the client.

Article 17 The position limit for a member or client in any particular stock index futures contract is specified as follows:

(1) the position limit for one-side positions held by a client in a particular contract shall be 600 lots;

(2) the one-side positions in a particular contract owned or controlled by a trading member undertaking proprietary business are subject to the position limit of 600 lots under each client number;

(3) if the aggregate one-side positions in any particular contract exceed 100,000 lots, the one-side positions owned or controlled by a clearing member in the said contract shall not exceed 25% of the aggregate one-side positions in the said contract.

The preceding paragraph is not applicable to a member or client with a granted hedging quota.

Article 18 If the positions owned or controlled by a member or client reach or exceed the position limit, the said member or client is not allowed to open new positions in the same direction.

Chapter V Large Position Reporting System

Article 19 The Exchange adopts a large position reporting system. The Exchange may release the open position reporting threshold based on market risk conditions.

When the positions held by a member or client in a particular contract reaches the position reporting threshold as specified by the Exchange, the member or client shall make reports to the Exchange. If the client fails to do so, the member shall make reports to the Exchange.

Article 20 When the positions held by a member or client in a particular contract reaches the position reporting threshold as specified by the Exchange, the member or client shall report to the Exchange prior to the closing of the market on the next trading day. The Exchange may in its discretion require the member or client to provide another report or a supplementary report.

Article 21 The member or client whose positions reach the reporting threshold specified by the Exchange shall submit the following documents:

(1) Large Position Reporting Form, which contains the member’s name and number, the client’s name and number, contract symbol, positions, trading margin and available funds;

(2) statement on the sources of funds;

(3) information about actual controller of the corporate client;

(4) account opening materials as well as the settlement document for the current day; and

(5) other documents as required by the Exchange.

Article 22 A member shall review the relevant documents provided by the client whose positions reach the reporting threshold specified by the Exchange and shall guarantee the truthfulness and accuracy of such documents.

Article 23 The Exchange shall be entitled to check and verify the documents provided by members or clients.

Article 24 Where a client holds positions with different members and the total positions held by the client reach the reporting threshold, the said client shall report the case to the Exchange. If the client fails to do so, the Exchange will designate one of the members appointed by the client to submit relevant documents of the client in accordance with Article 21 hereof.

Chapter VI Forced Position Liquidation System

Article 25 The Exchange adopts a forced liquidation system. Forced liquidation refers to a compulsory measure whereby the Exchange liquidates the positions held by a member or client in accordance with relevant regulations.

Article 26 The Exchange shall force liquidation of the positions held by a member or client if any of the following applies to the member or client:

(1) the balance of the clearing member’s settlement reserve is less than zero and the clearing member fails to make up the deficit within the specified time limit;

(2) the positions held by the client or by the trading member undertaking proprietary business exceed the position limit and the client or the trading member fails to close out the positions within the specified time limit;

(3) being punished by the Exchange in the form of forced liquidation for violations of rules and regulations or breaches of contract;

(4) forced liquidation is required as an emergency measure of the Exchange; or

(5) other circumstances in which forced liquidation is necessary.

Article 27 Forced liquidation shall be implemented in the first place by the member during the morning session after the opening of the market unless prescribed otherwise by the Exchange. If a member fails to complete the liquidation within the specified time limit, the Exchange will force liquidation.

1. Liquidation by the member

In the case of forced liquidation due to the circumstance set forth in (1) or (2) of Article 26 hereof, the principle for forced liquidation shall be determined by the member itself, provided that the result of the forced liquidation shall conform to the regulations of the Exchange.

2. Liquidation by the Exchange

(1) In the case of forced liquidation due to the circumstance set forth in (1) of Article 26 hereof:

the Exchange will arrange the positions to be liquidated in a descending sequence in terms of the total positions held in each contract after settlement on the previous trading day, then liquidate larger positions in the first place and smaller positions in the second place, and make allocation among relevant clients in proportion to their positions in the contract.

If forced liquidation is necessary for several clearing members, the Exchange will choose members for the liquidation in a decreasing sequence in terms of the amount of the additional trading margin required to be provided.

(2) In the case of forced liquidation due to the circumstance set forth in (2) of Article 26 hereof:

the Exchange will force liquidation of the excessive positions. If the client holds positions with different members, the Exchange will choose members for liquidation in the decreasing sequence in terms of the quantity of positions held with each member.

(3) In the case of forced liquidation due to the circumstance set forth in (3), (4) and (5) of Article 26 hereof, the Exchange will determine the positions for forced liquidation in accordance with the specific circumstances of the member or client involved.

In the case of forced liquidation due to both the circumstances set forth in (1) and (2) of Article 26 hereof, the Exchange will determine the positions to be liquidated first in accordance with the circumstance set forth in (2), and then in accordance with the circumstance set forth (1).

Article 28 Procedures for forced liquidation

1. Notification.

The Exchange will issue a Notification of Forced Liquidation (hereinafter referred to as the Notification) for forced liquidation to relevant clearing members. Apart from being delivered separately by the Exchange, the Notification will also be sent together with the clearing data of the same day as well. Relevant clearing members can obtain the Notification via the Exchange’s system.

2. Liquidation and confirmation.

(1) after the opening of the market, the relevant members shall liquidate positions on their own until the requirements of the Exchange are met;

(2) if a clearing member fails to fully complete liquidation within the specified time limit, the Exchange will force liquidation of the remaining portion;

(3) result of the forced liquidation will be sent along with the transaction record of the same day, and the relevant information is available via the Exchange trading system.

Article 29 The price for the forced liquidation will be generated from market transactions.

Article 30 In the event that forced liquidation can not be fully completed within the specified time limit due to daily price up/down limit or other market factors, the remaining positions will be liquidated on the following trading day based on the principle as defined in Article 27 until the requirements of the Exchange are met.

Article 31 In the event that forced liquidation can not be fully completed on the same day due to daily price up/down limit or other market factors, the Exchange will take appropriate disciplinary actions against the clearing member in question based on the calculation result for that day.

Article 32 In the event that forced liquidation can only be completed by a later time due to daily price up/down limit or other market factors, any losses arising therefrom shall be borne by the party held directly responsible. In case that the liquidation is not completed, the position holder shall continue to assume the responsibility for holding the positions or bear the duty of delivery.

Article 33 The proceeds generated from forced liquidation completed by a member shall be vested in the party held directly responsible. The proceeds and losses generated from forced liquidation completed by the Exchange, after being offset, shall be handled in accordance with relevant regulations of the State. Losses generated from forced liquidation shall be borne by the party held directly responsible.

If the party held directly responsible is a client, the losses generated from forced liquidation shall be first borne by the member with whom the client has an account, and then be claimed by the member from the client.

Chapter VII Forced Position Reduction System

Article 34 The Exchange adopts a forced position reduction system. Forced position reduction refers to the process whereby the Exchange effects automatic execution of outstanding close-out orders quoted at the price up/down limit for the current day against the positions held by clients whose net positions in the contract are profitable, in proportion to the positions held and at the price up/down limit for the same day.

Article 35 Methods for forced position reduction

1. If a client has both short and long positions, the close-out orders for its net positions will be included in the calculation of the forced position reduction, while other close-out orders will be automatically offset against the positions it holds in the opposite direction.

2. Determination of the liquidation quantity

The liquidation quantity refers to all the positions for which close-out orders quoted at the price up/down limit have been input into the Exchange’s system and remain outstanding by the closing of the market on Dt day, and meanwhile the unit loss of client s’ net positions is greater than or equivalent to 10% of the settlement price of Dt day.

Any client unwilling to liquidate its positions in the aforementioned manner may cancel its orders before the closing of the market.

3. Determination of the unit profit or loss of a client’s net positions in a particular contract

The unit profit or loss of a client’s net positions in a particular contract refers to the total profits or losses of the positions held by the client in the said contract divided by its net positions. The total profits or losses of the positions held by the client in the said contract refer to the profits or losses of all the positions it held in such contract, calculated on the basis of the difference between the settlement price of Dt day and the settlement price of Dt-2 day for all the transactions executed before Dt-2 day (inclusive), and also the difference between the settlement price of Dt day and the actual execution price for all the transactions executed on Dt-1 day and Dt day.

4. Determination of the scope of liquidation for clients with a profitable unit net position

All the profitable positions held by a client with a profitable unit net position greater than zero shall be included in the scope of liquidation.

5. Principle for allocating the liquidation quantity

(1) Within the scope of liquidation, liquidation quantity is allocated in three levels in sequence based on the profit level.

Liquidation quantity shall be first allocated to the positions whose unit profit of net positions is greater than or equivalent to 10% of the settlement price of Dt day (hereinafter referred to as the positions with more than 10% profit), then to the positions whose unit profit of net positions is smaller than 10% but greater than or equivalent to 6% of the settlement price of Dt day (hereinafter referred to as the positions with more than 6% profit), and finally to the positions whose unit profit of net positions is smaller than 6% of the settlement price of Dt day but greater than zero (hereinafter referred to as the positions with more than zero profit).

(2) The allocation for the aforementioned various levels shall be based on the ratio of the liquidation quantity (remainder of the liquidation quantity) to the profitable positions available for liquidation at various levels.

Where the quantity of the positions with more than 10% profit is greater than or equivalent to the liquidation quantity, the liquidation quantity shall be actually allocated to the positions with more than 10% profit, at the ratio of the liquidation quantity to the quantity of the positions with more than 10% profit.

Where the quantity of the positions with more than 10% profit is smaller than the liquidation quantity, the quantity of the positions with more than 10% profit shall be allocated to the clients that have placed the close-out orders, at the ratio of the amount of the positions with more than 10% profit to the liquidation quantity. Then, the remainder of the liquidation quantity shall be allocated in sequence to the positions with more than 6% profit and further to the positions with more than zero profit in the aforementioned manner. If there is still a remainder, it won’t be allocated any more.

6. Reduction of positions

Forced position reduction shall be effected after the closing of the market on Dt day, and the result of the forced position reduction shall be taken as the transaction result of members on Dt day.

7. Price for forced position reduction

Forced position reduction shall be effected at the price up/down limit imposed on the contract for Dt day.

8. At the time of clearing on the day of forced position reduction, the trading margin shall be at the normal level.

Economic losses arising from aforementioned forced position reduction shall be borne by the member and its clients.

Article 36 If the risks associated with the contract persist after the abovementioned measures have been taken, the Exchange will announce an extraordinary situation, and will take risk control measures pursuant to relevant regulations.

Chapter VIII Settlement Guarantee Fund System

Article 37 The Exchange adopts a settlement guarantee fund system. The settlement guarantee fund refers to the common guarantee fund comprising of contributions by clearing members pursuant to the regulations of the Exchange for the purpose of addressing the default risks of the clearing members.

Article 38 The settlement guarantee fund includes base guarantee fund and variation guarantee fund. The base guarantee fund refers to the minimum amount of guarantee fund that a clearing member must pay for participating in the clearing and delivery at the Exchange. The variation guarantee fund refers to the amount of the guarantee fund that exceeds the base guarantee fund and will be adjusted along with changes in the business volume of the clearing member. The settlement guarantee fund shall be paid in cash.

(1) Base settlement guarantee fund for different types of clearing members: RMB 10 million for a trading clearing member, RMB 20 million for a full-clearing member, and RMB 30 million for a special clearing member. A clearing member shall deposit the base guarantee fund in the Exchange’s special account for the settlement guarantee fund within 5 trading days after its signing of the Clearing Member Agreement of China Financial Futures Exchange.

(2) After the closing of the market on the last trading day of each quarter, the Exchange will determine the total amount of the settlement guarantee fund for the whole market in light of the overall market conditions and notify each member of its share in the total amount

Clearing members shall share the total amount of settlement guarantee fund in proportion to their respective business volumes. A clearing member’s share in the settlement guarantee fund = the total amount of settlement guarantee fund x (20% x average daily trading volume of the member for the previous quarter / average daily transaction volume of the Exchange for the previous quarter + 80% x average daily positions held by the member in the previous quarter/ average daily positions at the Exchange in the previous quarter).

The clearing member’s share in the total amount of the settlement guarantee fund and its base guarantee fund, whichever is greater, shall be taken as the settlement guarantee fund that the clearing member must pay for the new quarter. After the close of the morning session on the fifth trading day in the new quarter, the Exchange will transfer any surplus in the balance of the settlement guarantee fund to the clearing member’s special account for the settlement guarantee fund and deduct any deficit in the settlement guarantee fund from the clearing member’s special account for the settlement guarantee fund.

In case of a deficit in the settlement guarantee fund, the clearing member shall deposit the additional amount in its special account for the settlement guarantee fund not later than the fifth trading day in the new quarter.

(3) The Exchange may adjust the timing for collecting the settlement guarantee fund as well as the total amount of the settlement guarantee fund in line with market conditions and may in its discretion raise the level of the settlement guarantee fund for specific clearing members.

Article 39 Where the settlement reserve of a clearing member is smaller than zero and the deficit is not met within the specified time limit, if the settlement reserve still remains under zero after forced liquidation by the Exchange, the Exchange will first utilize the settlement guarantee fund of the defaulting member to cover the deficit. If there is still a shortfall, the Exchange will utilize the settlement guarantee fund of other clearing members on a pro rata basis.

The utilization of the settlement guarantee fund of any other clearing member shall be at the ratio of the balance of such member’s settlement guarantee fund to the available total amount of the settlement guarantee fund and shall be subject to the amount of the settlement guarantee fund paid by such member.

Article 40 After the settlement guarantee fund has been used as specified in Article 39 hereof, additional settlement guarantee fund shall be deposited in relevant clearing member’s special account for the settlement guarantee fund within 5 trading days to bring the settlement guarantee fund up to the original level. After the close of the morning session on the fifth trading day, the Exchange will make deductions and transfers from the clearing member’s special account for the settlement guarantee fund through the bank.

Article 41 Any clearing member failing to pay the settlement guarantee fund or the additional settlement guarantee fund within the specified time limit will be dealt with in accordance with the Measures of China Financial Futures Exchange on Dealing with Violations of Rules and Regulations and Breaches of Contract.

Article 42 After using the settlement guarantee fund, the Exchange shall have the right of recourse to the defaulting member.

Chapter IX Risk Warning System

Article 43 The Exchange adopts a risk warning system. When the Exchange deemed necessary, it may take one or more of such measures as requesting members and clients to make reports, giving a risk alert through talk, issuing a written warning, making a public censure, and issuing a risk warning letter, to warn of as well as ward off risks.

Article 44 Upon the occurrence of any of the following circumstances, the Exchange may in its discretion summon the designated senior officers of the member or client to have a talk to alert them to risks, or require the member or client to report on the situation:

(1) abnormal movement in futures price;

(2) abnormal trading activity undertaken by a member or client;

(3) abnormal positions of a member or client;

(4) abnormal funds of a member;

(5) a member or client is suspected of violations of rules and regulations or breaches of contract;

(6) the Exchange receives any complaint against a member or client;

(7) a member is involved in a judicial investigation; or

(8) other circumstances as recognized by the Exchange.

Article 45 For risk alert through talk, the Exchange shall comply with the following requirements:

(1) the Exchange shall issue a written notice to summon the designated senior officers of a member or a client for a talk. The client shall be accompanied by the person designated by the member;

(2) in the arrangement of the talk, the Exchange shall notify the member in writing of the time, location and relevant requirements one day in advance;

(3) if the person summoned for the talk can not attend the talk due to special reasons, he shall inform the Exchange in advance and, upon the approval of the Exchange, he may appoint any other person in writing for attending the talk on his behalf;

(4) the person summoned for the talk shall state the truth, and shall not conceal facts purposely;

(5) the staff members of the Exchange shall keep secret the information relating to the talk.

In the event that a member or client is required by the Exchange to report on the situation, the report shall be made in such form and shall contain such content as required by the large position reporting system.

Article 46 Where, through the situation reporting and talk, a member or client is found to be suspected of violations of rules and regulations or the trading position thereof are found to carry significant risks, the Exchange may in its discretion to issue a Risk Warning Letter to the member or client.

Article 47 Upon the occurrence of any of the following circumstances, the Exchange may in its discretion publish a public censure on the relevant member or client in the designated media:

(1) the member or client fails to report the situation or attend the talk as required by the Exchange;

(2) the member or client purposely hides the facts, conceals, misstates or omits material information;

(3) the member or client purposely destroys proofs on the violations of rules and regulations or breaches of contract, and fails to cooperate in the investigation conducted by the Exchange;

(4) the member or client is proved to have committed fraudulent acts against clients;

the member or client is proved to have engaged in splitting positions or manipulating the market; or

(5) other violations of rules and regulations as recognized by the Exchange.

Apart from making a public censure on the member or client involved, the Exchange will also deal with the violations of rules and regulations in accordance with the Measures of China Financial Futures Exchange on Dealing with Violations of Rules and Regulations and Breaches of Contract.

Article 48 Upon the occurrence of any of the following circumstances, the Exchange may in its discretion issue a risk warning notice, warning all the members and clients of risks:

(1) unusual movement in the futures price;

(2) a significant basis between the futures price and cash price;

(3) a member or client is suspected of violations of rules and regulations or breaches of contract;

(4) trading by a member or client involves significant risks; or

(5) other circumstances as recognized by the exchange.

Chapter X Supplementary Provisions

Article 49 Any violations of these Measures shall be dealt with by the Exchange in accordance with these Measures and the Measures of China Financial Futures Exchange on Dealing with Violations of Rules and Regulations and Breaches Contract.

Article 50 The power to interpret these Measures shall be vested in the Exchange.

Article 51 These Measures shall come into effect as of June 27, 2007.

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

All Rights Reserved WIld Wild Web Limited