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GOLD FUTURES DELIVERY REGULATIONS OF SHANGHAI FUTURES EXCHANGE (TRIAL)

(AMENDED SUBJECT TO SHFEA [2011] NO. 2)

 

Chapter 1 GENERAL PROVISIONS

1.1        These Regulations are made in accordance with the General

Exchange Regulations of Shanghai Futures Exchange to ensure the delivery against the gold futures and regulate physical delivery activities on or through the Shanghai Futures Exchange, or the Exchange.

1.2         These Regulations are applicable to the delivery against the gold

futures on or through the Exchange, and the settlement, computation on the amount tolerance and invoicing procedures in relation to the delivery, and binding on the Exchange, the member, the client (or investor) and the certified delivery gold vault.

 

Chapter 2 DELIVERY PROCEDURES

2.1 Physical delivery is referred to as the process in which the open positions to a futures contact is settled on its maturity by an exchange of the ownership of the commodity underlying the contract between the buyer and seller to a the trade.

2.2 After the last trading day of a futures contract, all the holders of open positions to the contract shall perform their obligations to the contract by the means of physical delivery. Physical delivery of a client shall be assigned to the client’s carrying member who represents the client on all the dealings on or through the Exchange.

A natural person client shall not exercise a physical delivery. After the closing of the third trading day prior to the last trading day of a gold futures contract, a natural person client shall hold nil (0) open positions to the contract. As of the second trading day prior to the last trading day, any of the natural person client’s outstanding positions will be closed out by the Exchange.

2.3 Physical delivery shall be concluded within the Delivery Period that is specified in the futures contract. The delivery period is the five business days succeeding the last trading day of the contract, as  named the first, second, third, fourth and fifth delivery day.

2.4 Delivery procedures

    2.4.1 The first delivery day

        The seller presents the standard warrant. Within the day the seller posts to the Exchange through the Standard Warrant System the valid standard warrant of which the carrying charges are fully paid. The carrying charges until the fifth delivery day (the day is included) is at the seller’s costs, and thereafter is at the buyer’s.

    2.4.2 The second delivery day

         The Exchange allocates the standard warrants.

    2.4.3 The third delivery day

          2.4.3.1 The buyer makes payment and receives warrants. On the day the buyer shall make payment and receive the standard warrants at the Exchange by the 14:00 hours.

        2.4.3.2 The seller receives payment. On the day the Exchange shall post the payment to the seller by the 16:00 hours. 

2.4.4 The fourth and fifth delivery day

     The seller submits invoice.

2.5 A standard warrant applied to the physical delivery on or through the Exchange is circulated in the order of the following procedures:

i) The seller client entrusts the standard warrants to the seller’s FCM member for dealings of physical delivery;

ii) The seller’s member submits the standard warrants to the Exchange;

iii) The Exchange allocates the standard warrants to the buyer’s member; and

iv) The buyer’s member distributes the standard warrants to the buyer client.

 

Chapter 3 MOVE-IN AND MOVE-OUT

3.1 Physical delivery against the matured contract takes place at the delivery gold vault certified by the Exchange.

3.2 Move-in application (delivery notice)

The owner that is about to send goods to the certified delivery gold vault for placing on warrant shall present a move-in application (delivery notice). Product, grade, quantity, sender, destined certified delivery vault shall be clarified in the application. A client shall instruct its carrying member to present its application.

3.3 Approval of the move-in application

Given the availability of storage capacity, the Exchange shall, in its discreet consideration of the owner’s intent, determine within three (3) business days whether the move-in application is approved. The owner shall address goods to the destined vault that is specified in the approve move-in application subject to the time limit prescribed by the Exchange. Bullions will be rejected for warranting if the Exchange does not grant the approval to the move-in or the move-in exceeds the specified time limit.

3.4 Move-in inspection

i) When the domestic bullions arrive at the certified vault, the clerk who is employed by the approved refiner on the list of the Exchange’s approved refiners and whose information has been registered with the Exchange shall deal in the move-in procedures for the goods;

ii) When the imported bullions arrive at the certified vault, the clerk who is the importing bank’s employee and whose information has been registered with the Exchange shall deal in the move-in procedures for the goods;

iii) If the spot bullions stored in the same vault are to be placed on warrant, documentation or other certificates shall be provided by the refiner of those spot bullions or the importing bank thereof in evidence of the fulfillment of relevant move-in procedures;

iv) The certified vault shall inspect the arrived bullions and verify the accompanying documentation. Inspection includes quality assaying and quantity (weight) assaying.

Domestic bullions:

i)             The Quality Proof submitted by the refiner shall be referred to for the purpose of quality assaying;

ii)           Quantity (weight) assaying

The certified vault will check the refiner’s Quality Proof and packaging certificate, count the bullions, reassess the weight of each one. Subject to the scale difference as prescribed by the Exchange, the gross weight identified in the refiner’s Quality Proof and packaging certificate shall be referred to for the three kilogram (3kg) bullion; the gross weight of one kilogram (1kg) bullion shall be no less than one kilogram (1kg), and if greater than one kilogram (1kg) shall be counted as one kilogram (1kg).

Imported bullions:

i)             The impression on the bullion and the corresponding quality proof shall be referred to for the purpose of quality assaying;

ii)           Quantity (weight) assaying

The certified vault will count the bullions and reassess the weight of each one. The reassessment of weight by the vault shall be referred to for the gross weight of three kilogram (3Kg) bullion; the gross weight of one kilogram (1kg) bullion shall be no less than one kilogram (1kg), and if greater than one kilogram (1kg) shall be counted as one kilogram (1kg).

3.5 The owner’s oversight of delivery

The owner shall be present at the vault to oversee the move-in; otherwise, it shall be deemed that the owner conforms to the conclusions of inspection drawn by the certified vault.

3.6 Issuance of the standard warrant

The certified delivery vault will, to the order of the Exchange, issue the standard warrant. The owner will confirm to the vault on the issuance through the Standard Warrant Management System. If the confirmation is made before the 14:00 hours of a business day, the Exchange will settle the quantity tolerance on the business day and the standard warrant becomes valid accordingly. If the confirmation is made after the 14:00 hours, the Exchange will settle the quantity tolerance on the next business day and the standard warrant becomes valid accordingly. The business day when the standard warrant becomes valid is the Warrant Valid Day.

3.7 Move-out

i) When the owner is about to take delivery, it shall place the move-out application through the Standard Warrant Management System and select a region where to take the delivery. The Exchange will designate a vault at the region the owner favors and a day (the Move-out Day) out of the five business days succeeding the placement of the application where and when the delivery to take place. On one business day (the Move-out Notification Day) before the Move-out Day, the Exchange will notify the owner of the Move-out Day. The owner shall take the delivery at the designated vault within two business days as of the Move-out Day.

ii) The Exchange will, on the Move-out Notification Day, settle the quantity tolerance of the bullions that are selected to be placed off warrant.

iii) When the owner takes the delivery, it shall input the move-out password in the Standard Warrant Management System, provide valid ID certificates. The certified vault shall permit the move-out after verification of the identity of the person who takes the delivery.

iv) Fill out the Goods off Warrant Confirmation

The certified vault shall, in its delivery of the goods, fill out the Goods off Warrant Confirmation (in duplicates and each of which is retained by the owner and the vault respectively) and keep it for any checks thereafter.

v) The standard warrants will be invalidated if the owner, after placing the move-out application, fails to take the delivery at the vault within the specified time limit, and the bullions on those warrants will be unwarranted. Charges and costs in relation to those unwarranted bullions will be negotiated and settled between the owner and the vault.

3.8 Disputes on quality and quantity (weight)

If the person taking the delivery has disputes on the quality and quantity (weight) of the bullions for placing off warrant, it shall raise them on the site of the delivery at the vault and instruct a certified assayer on the list of the Exchange’s certified assayers to take samples from the goods and conduct quality and quantity (weight) testing.

Conclusions drawn by the certified assayer shall be final to determine the quality and quantity (weight) of the bullions. If problems are found with regard to the quality and quantity (weight), the person taking the delivery shall, within five business days as of the conclusions being provided by the certified assayer, apply to the Exchange in writing for its looking into the disputes over the quality and quantity (weight) and in the meantime submit the assaying conclusions made by the certified assayer. Failure of the person taking the delivery to place the written application of disputes within the specified time limit or to provide the assaying opinions of the certified assayer shall be deemed as the conformity of the person to the goodness of the delivery, and the Exchange will not hear any more of such application thereafter.

If the assaying conclusions determine the goodness of the delivery with regard to the quality and quantity (weight), the charges and costs incurred shall be borne by the person taking the delivery; otherwise, the person who is established responsible shall assume all the indemnifications and costs.

 

Chapter 4 WARRANTED PRODUCT

4.1 Warranted unit

The weight for the gold futures particularized in a standard warrant is three kilograms (3kg) in net. Amounts for warranting shall be the integral multiples of three kilograms (3kg).

4.2 Grades and qualifications for warranting

Domestic bullions of a minimum fineness 9995 parts per 1,000 fine gold (99.95%) and the standard gold bullions that are on the list of good delivery of the London Bullion Market Association and certified by the Exchange.

4.3 Goods for placing on warrant

i) Domestic products: bullions registered with the Exchange

ii) Imported products: standard bullions on the list of good delivery of the London Bullion Market Association and certified by the Exchange

4.4 Specifications for the warranted product

One kilogram (1kg) bullion of a minimum fineness 9999 parts per 1,000 fine gold (99.99%) or three kilogram (3kg) bullion of a minimum fineness 9995 parts per 1,000 fine gold (99.95%)

Bullions in a warrant shall be of one refiner, one brand name, one trademark, one grade of quality and one shape.

4.5 Packaging for the goods

Each bullion shall be wrapped with clean paper or plastic film and packed in wooden or plastic boxes. Any damage or contamination shall not be incurred during the transportation and storage of the goods.

4.6 Quantity tolerance and scale difference

For each three kilogram (3kg) bullion, the net weight can be fifty grams 50gmore or less. For each one kilogram (1kg) bullion, the gross weight shall no less than one kilograms (1kg), and if greater than one kilogram (1kg) shall be counted as one kilogram (1kg).

Scale difference of each bullion is within the range between plus and minus point one gram (±0.1g).

 

Chapter 5 DELIVERY SETTLEMENT, QUANTITY TOLERANCE SETTLEMENT AND INVOICING PROCEDURES

5.1 Quantity tolerance is the difference between the net weight of the bullions particularized in a standard warrant and the net weight of fine gold on a standard warrant in taking or making delivery of the bullions. It is a positive quantity tolerance if the difference turns out to be plus zero or a negative quantity tolerance if the difference to be minus zero. The Exchange settles the quantity tolerance either on the Warrant Valid Day or Move-out Notification Day (the Quantity Tolerance Settlement Day).

Bullion’s net weight=Bullion’s gross weight×Bullion’s fineness

Quantity tolerance=Bullion’s net weight—Net weight on warrant

5.2 The Gold Futures Settlement Invoice is printed to the approval by the taxation authorities for the sole purpose of gold futures delivery settlement and quantity tolerance settlement. The invoice consists of three pages as the Invoice Page, the Settlement Page and the Record Page.

5.3 Delivery settlement and invoicing procedures

i) Delivery settlement: the delivery settlement price of a gold futures contract is the volume-weighted average of all the transaction prices of the contract for the last five trading days on any of which there are established valid transaction prices. The delivery settlement price is applied to compute the payment due to the delivery (the Delivery Payment).

ii) Settlement of the Delivery Payment: the Delivery Payment between the buyer and seller is figured to the net weight on warrant. The Exchange settles the payment of the members only. The buyer client’s payment is posted through its carrying member, or the buying member, and the seller client receives the payment through its carrying member, or the selling member.

The Delivery Payment is computed in the following formula:

The Delivery Payment=number of the standard warrant×net weight on warrant×the delivery settlement price

iii)          Delivery invoice: the regular invoice is issued on the delivery

iv)         Circulation of the delivery invoice:

l  The selling Non-FCM member or the seller client submits the regular invoice to the Exchange;

l  The Exchange issues to the buying Non-FCM member or the buyer client the Invoice Page of the Gold Futures Settlement Invoice, to the selling Non-FCM member or the seller client the Settlement Page of the Gold Futures Settlement Invoice, and keeps the Record Page of the Gold Futures Settlement Invoice to itself.

l  Delivery of the invoice and documentation between the client and the Exchange shall be made by the member.

5.4 Settlement of the quantity tolerance for warranting and invoicing procedures

i) Settlement of the quantity tolerance for warranting: the settlement price of the gold futures contract of the nearest delivery month on the business day prior to the settlement day of the quantity tolerance is applied to compute the payment due to the quantity tolerance.

ii) Relevant invoices to the quantity tolerance: for a positive quantity tolerance, the person sending the bullions for warranting shall submit the regular invoice to the Exchange; for a negative quantity tolerance, the Exchange issues to the person the Invoice Page of the Gold Futures Settlement Invoice and keeps to itself the Record Page of the Gold Futures Settlement Invoice.

iii) Settlement payment for the quantity tolerance is computed in the following formula:

Settlement payment for the quantity tolerance=the quantity tolerance×the settlement price of the gold futures contract of the nearest delivery month on the business day prior to the settlement date of the quantity tolerance

5.5 Settlement of the quantity tolerance for unwarranting and invoicing procedures

i) Settlement of the quantity tolerance for taking the delivery by the unapplied standard warrants: when the member or client (person taking the delivery) claims the outbound delivery of the goods by the standard warrants that are not yet applied to physical delivery, or the unapplied standard warrants, the payment for the quantity tolerance is figured to the settlement price of the gold futures contract of the nearest delivery month on the business day prior to the settlement date of the quantity tolerance. For a positive quantity tolerance, the Exchange will issue the person taking the delivery the Invoice Page of the Gold Futures Settlement Invoice and keep to itself the Settlement Page and Record Page of the Invoice. For a negative quantity tolerance, the person taking the delivery will submit the regular invoice to the Exchange.

ii) Settlement of the quantity tolerance for taking the delivery by the applied standard warrants: when the member or client claims the outbound delivery of the goods by the standard warrants that are applied to physical delivery, or the applied standard warrants, the payment for the quantity tolerance is figured to the settlement price of the gold futures contract of the nearest delivery month on the business day prior to the settlement date of the quantity tolerance, and the taxation authority over the Exchange will, on the Exchange’s behalf, issue the buying member or buyer client the Reimbursement Page of the Value-added Tax Invoice with regard to the actual Delivery Payment (including the Delivery Payment and the settlement payment for the quantity tolerance) and amounts of goods claimed that are specified in the Delivery Settlement Certificate, the Goods off Warrant Confirmation, the Quantity Tolerance Settlement Certificate that are provided by the buying member or the buyer client, and render the Invoice Page and Record Page of the Value-Added Tax Invoice to the Exchange’s retention. The Value-added Tax Invoice will not be issued to the member or client taking the delivery if it is not a qualified value-added taxpayer.     

iii) Settlement payment for the quantity tolerance is computed in the following formula:

Settlement payment for the quantity tolerance=the quantity tolerance× the settlement price of the gold futures contract of the nearest delivery month on the business day prior to the settlement date of the quantity tolerance

5.6 The actual Delivery Payment the buying member or the buyer client taking the delivery is comprised with the Delivery Payment and the settlement payment for the quantity tolerance. The Delivery Payment is determined in the First-In-First-Out methodology. The unit price, gross value and tax due are calculated in the following formulas:

The actual Delivery Payment=the Delivery Payment+the Settlement payment for the quantity tolerance;

The actual delivery price=the actual Delivery Payment÷the Amounts of goods claimed;

The unit price quoted in the Value-added Tax Invoice=the actual delivery price÷(1+the value-added tax rate);

The gross value quoted in the Value-added Tax Invoice=amounts×the unit price quoted in the Value-added Tax Invoice;

The value-added tax due=the gross value quoted in the Value-added Tax Invoice×the value-added tax rate.

 

Chapter 6 EXCHANGE OF FUTURES FOR PHYSICALS

6.1 The Exchange of Futures for Physicals, or the EFP, is the process that the members (clients) who hold opposite positions to the same delivery month futures contract apply to the Exchange and, with the Exchange’s approval, close out such positions through the Exchange and at the price that is fixed by the Exchange, and post the standard warrants or the certificates of the claim to goods that are in conformity with the quantity, product and direction of the underlying commodity of the contract at the mutually agreed price.

Unmatured contracts can be settled by the EFP.

6.2 The EFP is exercisable as of the first business day after the last trading day of the previous month to the delivery month of the EFP contract to the second business day (the day is included) prior to the last business day of the EFP contract delivery month.

Subject to the said time limit the counterparties agreeing on the EFP shall apply to the Exchange on by the 14:00 hours on any day falling in the said time (the Application Day) through the Standard Warrant Management System for the EFP.

For the delivery against the substandard warrants, the buying and selling members (clients) shall comply with the relevant national statutes, rules and regulations and provide photocopies of relevant sales agreement and certificate of claim to goods.

6.3 The EFP shall be applied to all the historical positions to the gold futures listed on the Exchange but not to the positions open on the Application Day.

6.4 The delivery settlement price for the EFP is the price negotiated and agreed by the buying and selling members (clients).

6.5 The corresponding futures positions to the contract of the delivery month held by the buying and selling members (clients) into the EFP will be closed out at the settlement price of the contract on the business day prior to the Application Day by the Exchange by the 15:00 hours of the Application Day.

6.6 For the EFP in which the standard warrants are applied, the exchange of the corresponding notes and papers (including payment, warrants) is made through the Exchange. The trade margins in relation to the EFP shall be figured to the settlement price of the contract on the business day prior to the Application Day, and the exchange of notes and papers be concluded by the 14:00 hours of the business day after the Application Day on the Exchange.

6.7 For the EFP in which the standard warrants are applied, the seller shall submit the regular invoice to the Exchange within seven days as of the conclusion of the EFP procedures. The Exchange will issue the buyer the regular invoice on the first business day after when it receives the seller’s regular invoice and refund the seller the trade margins pertaining to the EFP.

Failure to submit the regular invoice subject to the said time limit shall be disciplined in accordance with the rules provided in the Clearing Regulations of Shanghai Futures Exchange concerning the delay of the submission of the Value-added Tax Invoice.

6.8 For the EFP in which the substandard warrants are applied, the exchange of payment and warrants is made, as agreed between the buying and selling members (clients), either through the Exchange or directly between the buying and selling members (clients). Any disputes incurred in such process shall be negotiated and resolved by the buying and selling members (clients) and the Exchange will not be responsible for the performance of the obligations pertaining to the agreement.

6.9 The delivery payment pertaining to the EFP which is settled by the Exchange shall be posted through the in-house fund transfer system.

6.10 Failure to conclude the EFP in compliance with the provisions in this Chapter shall be subject to the sanctions provided in these Regulations on delivery default.

6.11 Any ill-willed EFP behavior shall be subject to the sanctions as provided in the Enforcement Regulations of Shanghai Futures Exchange.

6.12 The Exchange shall make a timely disclosure of information on the EFP.

 

Chapter 7 CHARGES AND FEES

7.1 Delivery costs

Parties involved in the physical delivery shall pay to the Exchange point zero six yuan per gram (0.06 yuan/g) as the delivery fees.

7.2 Carrying fees

The Exchange, in satisfaction of the owner’s intent on where to make and take the delivery, designates the carriage of bullions among the certified gold vault. The Exchange will claim the carrying fees from the owner through the member on the Warrant Valid Day and the Move-out Notification Day. The rates for the carrying fees will be pronounced in due course.

7.3 The items and rates of charges and fees incurred in the handlings of move-in, move-out and storage will be verified and approved by the Exchange and pronounced in due course.

7.3 The storage fees of bullions will be paid through the Exchange on a regular basis.

 

Chapter 8 DEFAULT

8.1 Any of the following acts constitute a default on delivery:

i) A seller fails to present standard warrants in sufficient amount subject to the specified time limit;

ii) A buyer fails to make payment in sufficient amount subject to the specified time limit; or

iii) The bullions a seller delivers do not comply with the specified grades and qualifications.

8.2 In computing the buyer’s amounts of insolvent contracts, a deposit of twenty percent (20%) of the value of the contracts shall be reserved for default fines and indemnifications.

The following formulas shall be applied to count the insolvent amounts:

SAD=ASWD– ASWP

BAD=(PD – PM)÷(1-20%)÷DSP÷CS

where

SAD=Seller’s Amounts (in lot) Defaulted

ASWD=Amounts (in lot) of Standard Warrants Due

ASWP=Amounts (in lot) of Standard Warrants Presented

BAD=Buyer’s Amounts (in lot) Defaulted

PD=Payment Due

PM=Payment Made

DSP=Delivery Settlement Price

CS=Contract Size

8.3 If a default exists, the Exchange shall, by the 16:30 hours of the default day, notify the party who commits the default, or the defaulter, and the party who is defaulted on, or the defaultee.

The defaultee shall, by the 11:00 hours of the ensuing business day, submit to the Exchange a written intent for whether to terminate or continue the delivery. Failure to submit the intent within the specified time limit shall be deemed by the Exchange as the defaultee’s determination on termination of the delivery.

8.4 In the event of a default, the defaulter shall post a default deposit in sum of five percent (5%) of the nominal value of the defaulted amounts, and the following methods shall be applied:

i) If the seller defaults, the buyer may opt for any of the following actions:

a. Terminate delivery. The Exchange shall refund the payment to the buyer; or

b. Continue delivery. The Exchange shall, on the next business day after it rules the seller commits a default, call for a public procurement for the standard warrants and commence it within seven business days. If the procurement proves successful, the Exchange shall present the procured standard warrants to the buyer; otherwise, the seller shall make payment to the buyer in sum of fifteen percent (15%) of the nominal value of the defaulted amounts as indemnifications, the Exchange shall return the delivery payment to the buyer and the delivery is terminated. The seller shall bear all the losses and costs due to or arising in the public procurement.

ii) If the buyer defaults, the seller may opt for any of the following actions:

a. Terminate delivery. The Exchange shall return the standard warrants to the seller.

b. Continue delivery. The Exchange shall, on the next business day after it rules the buyer commits a default, call for a public sale of the standard warrants and commence it within seven business days. If the sale proves successful, the Exchange posts the delivery payment to the seller; otherwise, the buyer shall make payment to the seller in sum of fifteen percent (15%) of the nominal value of the defaulted amounts to the seller, the Exchange shall return the standard warrants to the seller and the delivery is terminated. The buyer shall bear all the losses and costs due to or arising in the public sale.

The Exchange’s obligations to guarantee the delivery shall be dismissed with the termination of the delivery.

8.5 The procurement price shall not be greater than one hundred and twenty five percent (125%) of the delivery settlement price and the sale price no smaller than seventy five percent (75%) of the delivery settlement price.

8.6 In the event of the buyer and seller default simultaneously, the Exchange shall terminate the delivery and impose a fine on both sides in sum of five percent (5%) of the nominal value of the defaulted amounts.

8.7 If a member commits a partial delivery default, the standard warrants or the payment the defaulter member receives may be applied to the resolution of the default.

8.8 If a member intends to commit a default on physical delivery, it shall be brought subject to sanctions provided in the Enforcement Regulations of Shanghai Futures Exchange.

8.9 The member involved in a default and the certified delivery depot are obligated to provide evidences, materials and information with regard to the default. The member’s failure to provide those evidences, materials and information will not prevent the nature of a default being substantiated.

8.10 Disputes over the assaying conclusions on bullions of delivery between the owner and the certified delivery gold vault will be resolved by the method of a joint inspection that both parties attend, or by a re-inspection by the quality inspection organization designated by the Exchange, in the latter of which, the conclusions drawn in the re-inspection will be referred to as authoritative.

 

Chapter 9 OTHERS

9.1 The Exchange reserves the right to interpret these Regulations.

9.2 The Gross Weight as referred to in these Regulations is the weight of a bullion (excluding the packaging materials), the Net Weight is the weight of the fine gold in a bullion, as Net Weight=Gross Weight ×fineness.

9.3 Provisions in the By-laws of Shanghai Futures Exchange, the General Exchange Regulations of Shanghai Futures Exchange and the relevant rules and regulations of the Exchange shall be applicable to the circumstances or conditions that are not addressed in these Regulations.

9.4 These Regulations are effective as of January 14, 2011. (If conflicts exist, provisions in the SHFEA [2011] No. 2 shall prevail.)

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