Derivatives mkt seen as risk mgmt tool

Given escalated geopolitical tensions and mounting external uncertainties, experts suggest China's derivatives market should play a bigger role in meeting enterprises' growing demand for risk management amid sharp price volatility of commodities, while steadily advancing its opening-up to strengthen China's pricing power.

Their comments were made on Thursday during the two-day 2026 Shanghai Derivatives Market Forum.

Zhang Yue, deputy director of the department of futures supervision at the China Securities Regulatory Commission, said that opportunities outweigh challenges for China's derivatives market, as companies voiced urgent demand for risk management amid profound changes in the global economic and trade order.

Against such a backdrop, efforts will be made to further enrich China's futures product supply to better meet industries' pricing autonomy and risk hedging demand. The trading mechanism should also be further optimized to lower costs for participating firms. More resources should be directed toward critical sectors so that the futures market can serve as a safe haven for industries, said Zhang.

By leveraging China's large trading volume and outbound investment, the futures market should advance its institutional opening-up and more deeply participate in the formulation of international rules and standards. More derivatives should be opened up to overseas investors. Meanwhile, more overseas institutions should be introduced into the Chinese derivatives market to enhance the international influence of "China pricing", he added.

Currently, overseas investors can directly participate in the trading of 11 derivatives listed in Shanghai, including the yuan-denominated crude oil futures launched in 2018 and bonded copper futures introduced in 2020. These are considered important references for global commodities pricing, Zhang said.

As of end-September, 59 futures and options products were traded in Shanghai, 48 of which traded on the Shanghai Futures Exchange, with the remainder listed on the China Financial Futures Exchange.

Apart from consolidating its strength in metal, energy and shipping futures, the SHFE will steadily advance the launch of natural gas and corrugated base paper derivatives, said the exchange's chairman Tian Xiangyang.

Efforts will be made to launch strategic and fundamental products such as electricity futures. The application scenarios for "Shanghai prices" should be expanded, Tian said.

One imminent example will be the London Metal Exchange steel hot-rolled coil Shanghai contract scheduled to trade at the LME on Oct 27. Since its launch in 2014, the SHFE HRC futures contract has grown into the world's largest flat steel futures contract. MiRan Park, LME's chief business officer, said the new arrangement will provide direct access to the global benchmark and grant offshore LME participants an easier entry point.

He Qingwen, chairman of China Financial Futures Exchange, said that accelerated efforts are being made to develop index futures and options for ChiNext and the STAR Market to meet investors' needs of precisely managing the higher volatility of tech-heavy boards.

Zhu Ning, professor at the Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University, said that discerning, pricing and trading risks are the very basics of finance while the ultimate purpose of introducing derivatives is to help manage risks. Patient capital is usually more concerned about risks regarding macroeconomic growth, technological transformation, interest rates and foreign exchange, all of which can be effectively managed by derivatives.

Therefore, substantial development of the derivatives market can provide diversified solutions, manage extreme risks via standardized or tailor-made contracts and help society to better understand long-term risks, Zhu said.