China to Open Iron-Ore Futures Market to Foreign Investors in May
China has taken another step to opening up its futures markets to the world, announcing that it will allow foreign investors to trade domestic iron-ore futures as of May 4.
The move follows the debut of China’s first yuan-denominated crude oil futures last month in Shanghai, signaling the country’s ambition to have a say on the global pricing of commodities.
China Securities Regulatory Commission spokeswoman Gao Li announced the news at a regular news briefing on Friday.
The Dalian Commodity Exchange, currently the only Chinese exchange offering iron ore futures contracts, issued draft rules last month to guide foreign investors who wish to participate in the market.
The guidelines say foreign investors can trade in the market through a futures-company member or through overseas brokers who entrust a futures-company member with the trading.
China is the world’s largest consumer of iron ore, but Chinese buyers don’t always get the best prices partly because its locals-only exchanges don’t have pricing power outside the country.
China imported 1.08 billion tons of iron ore in 2017, accounting for 68% of total global shipments.
With access for foreign investors, market participants expect the Dalian Exchange-traded iron ore futures to become a pricing benchmark in international iron ore trade.
Since the Dalian Exchange launched its iron ore futures contract in 2013, active trading of the contract has made the exchange the world’s largest iron-ore derivatives market.
The amount of iron ore futures traded on the exchange reached 17.08 trillion yuan ($2.72 trillion) in 2017, an 18% growth from the prior year, according to exchange data.
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