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The Shanghai Futures Exchange, the country's leading commodities market, is expected to launch after-hours trading before the end of the year, in a critical step to gain a foothold in global futures trading.
The exchange will further boost its international ambitions by expanding the list of futures contracts in the coming years, including crude oil — one of the world's most important commodities — said Yang Maijun, general manager of the exchange.
"We are actively making preparations and hope to roll out night trading this year," Yang, a national legislator from Shanghai, said on the sidelines of the first session of the 12th National People's Congress.
The exchange now trades from 9 am to 11:30 am and from 1:30 pm to 3 pm Beijing time. The extended trading hours will bridge the gap between domestic investors and foreign markets, and will align the exchange with international practices, Yang said.
The move will allow market participants to hedge and adjust their positions after breaking news emerges in the United States or Europe, thus reducing price volatility, said Li Ning, a futures researcher in Shanghai.
And as Shanghai is on course to become an international financial center, after-hours trading will also help boost demand for the renminbi in the global market, Li added.
Yang said that China is also positioning its futures markets to become major players, and shape the global prices for metals, energy and farm commodities. This will give Chinese traders a direct role in valuing the contracts, and will help the country to be less at the mercy of markets elsewhere.
China is a heavy user of industrial and agricultural commodities, such as oil, copper and aluminum. But with an isolated futures market, the country has little say over global prices.
To change things, China needs to diversify its futures portfolio and make the market more transparent, Yang noted.
In January, the exchange performed a test run of its international trading platform to make it technically eligible to trade foreign currency and renminbi.
"We should allow qualified foreign investors, notably institutional investors and corporate clients, to take part in the trading," Yang said.
The country's securities regulator, the China Securities Regulatory Commission, has given foreign investors limited access to the futures market. To access the market, foreign investors should hold a stake of less than 5 percent in a domestic futures brokerage through a Chinese legal entity.
Yang said that the legislation process of the country's futures contract law should be quickened so as to regulate the market and protect investors' rights.
"The law will help the development and improvement of trading categories, trading volumes and investor structure. After a 20-year experience, China's futures market is mature enough to handle things within a legal framework," he said.
The Shanghai Futures Exchange has 10 trading categories, including gold, silver, copper and aluminum.
Aside from the Shanghai exchange, China has three other commodities bourses: the Dalian Commodity Exchange in Liaoning province, the Zhengzhou Commodity Exchange in Henan province, and the China Financial Futures Exchange in Shanghai.