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Cotton futures trading begins on June 1
By Xiao Sun (China Daily)
Updated: 2004-05-29 11:29

Long-expected cotton futures will start trading on June 1, the Zhengzhou Commodity Exchange announced on Thursday.

It comes ahead of fuel oil as the first new futures product promoted this year, which also brings much surprise to many in the futures business.

Shanghai Futures Exchange got regulator's approval for the resumption of fuel oil futures in April and pledged to launch it as soon as possible.

However, it has not made any real moves to date, giving Zhengzhou the lead.

Cotton futures are practically the first new futures available in the market since the late 1990s. Zhengzhou introduced a high-quality strong-gluten wheat contract last year, but it was only a supplement to existing wheat contracts.

The arrival of the new futures product marks a faster pace of product innovation in the recovering futures market and will boost investor and broker confidence, analysts said.

Apart from the exchange, many futures brokerages are also planning promotion activities for cotton futures to introduce the new products to their clients.

"The launch of cotton futures is great news to us. We are looking forward to the development of more types of cotton contracts," said a broker with Suntime Futures in the Xinjiang Uygur Autonomous Region in Northwest China, a major cotton production base in China.

For the time being, Zhengzhou will only promote the No 1 cotton contract.

As it gathers more experience, plans are to develop a No 2 contract and more in the future, an exchange spokesman said.

It is expected that each of the three futures exchanges in China will launch one new futures product this year. Apart from Zhengzhou and Shanghai, the Dalian Commodity Exchange is also applying for corn futures, but has not received approval yet.

Futures products would help domestic enterprises hedge risks brought by price fluctuations, however, regulators are also concerned about potential speculation in the market.

China Securities Regulatory Commission issued a circular on Wednesday to warn cotton traders against speculative behaviour and tighten supervision.

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