Operational Manual for Gold Futures Contract Trading
2011 Edition
Shanghai Futures Exchange
http://www.shfe.com.cn
Operating Manual for Gold Futures Contract Trading (2011 Edition)
This operational manual is for reference only. For updates please call relevant departments of Shanghai Futures Exchange at 8621-68400000 or visit http://www.shfe.com.cn.
Contents
l Properties of Gold /01
Natural Quality /01
Other Qualities /01
Main Usage /02
l Supply and Demand of Gold /03
Supply of Gold /03
Demand of Gold /04
l Factors Influencing Gold Price /05
Historical Trend of Gold Price /05
Influencing Factors /05
SHFE Gold Contract and Related Regulations
l Gold Contract and Appendix /08
l Key Points of Detailed Trading Rules /10
l Key Points of Detailed Settlement Rules /11
l Key Points of Detailed Delivery Rules /12
l Key Points of Rules on Risk Control and Management /15
l Key Points of Detailed Rules on Hedging Trade /19
Appendix I: Registered Trademark and Packaging Standard of Gold Bullion of SHFE /20
Appendix 2: Certified Delivery Warehouse of SHFE /21
Appendix 3: Storage and Transportation Fees of Gold Futures /23
Properties of Gold
Natural Quality
Gold has a chemical symbol “Au”, atomic number 79, atomic weight 197, mass number 183-204. Its melting point is 1,063℃ and boiling point 2,808℃. It has a density of 19.32g/cm3 at 20℃.
With fair softness, gold is easy to forge and stretch. Gold can be grinded into film 0.00001mm thick with current technology; gold weighing 1g can be stretched to filament 3.5 kilometers long with a diameter of 0.0043 mm. The mineral hardness of gold is 3.7, and the hardness of 24K gold jewelry is only 2.5.
Gold has good electric conductivity and thermal conductivity. It is diamagnet, but gold containing manganese has high magnetic susceptibility, and gold containing a large amount of iron, nickel and cobalt is strong magnet.
With its reflection performance within the infrared region, gold has high reflectivity and low radiance. It contains the alloy of other elements which can alter the wavelength, i.e., alter the color. Gold features low temperature in recrystallization.
Gold has high resistance to chemical corrosion and discoloration. It is extremely stable in alkali and all kinds of acids, and is neither oxidized nor discoloured in the air. Gold is apparently insoluble in hydrogen, oxygen and nitrogen. Oxygen does not affect its high temperature characteristics. Gold does not suffer melting, oxidization, discoloration or loss at 1,000℃, which best differentiates it from any other metal.
Other Qualities
Unlike ordinary commodities, gold has been equipped with currency, financial and commodity attributes since it was discovered by mankind. Going through the social development history of mankind, gold had its financial and commodity attributes play different roles and exert different influences in different historical stages.
Gold was among the metals that mankind discovered and began to use quite early in history. It was hailed as “King of Metals” for its rareness, uniqueness and preciousness. Consequently, it was once the symbol of wealth and luxury and was used for financial reserve, currency and jewelry. Social development brought about constant changes to the economic role and commodity application of gold. While its financial reserve and currency functions undergo adjustment, its commodity function is coming back. The rapid development of modern industry and high technology leads to the ongoing expansion of the application of gold in these fields. The application of gold in international reserve, currency and jewelry remains dominant.
Main Usage
International Reserves
The fine characteristics of gold granted itself such functions as measure of value, medium of circulation, means of storage, medium of payment and world currency. Gold quit the role of circulating medium when it was disconnected with US dollar in the 1970’s, which greatly weakened its currency function. However, gold remains crucial in the international reserves of many countries.
Gold Jewelry
Gold jewelry has long been a symbol of social status and wealth. In addition, the constant improvement of people’s income, accumulation of wealth and increase in the awareness of value and diversified investment contribute to its continually increasing demand.
Industry and Hi-tech Industry
Gold has unique physicochemical properties: very high anticorrosion stability; good electric conductivity and thermal conductivity; big effective cross-section for neutron capture in atomic nucleus; nearly 100% reflectance to infrared light; all kinds of catalytic properties in gold alloy; fine manufacturability, high processability into ultrathin gold foil, micron gold wire and gold dust and high platability to the surface of other metals, earthenware and glass; easiness for fusion welding and forge welding; manufacturability for superconductor and organic gold. As a result, gold is widely used in industry and modern hi-tech industry, e.g., the field of electronics, communication, astronavigation, chemical industry and medical care.
Supply and Demand of Gold
Supply of Gold
There are over 80 countries producing gold in the world, among which main gold resource countries are South Africa, Russia, China, Uzbekistan, Australia, Canada, Brazil, etc. The supply of gold in the world gold market is from: the mineral gold of the gold-producing countries; regeneration of gold; gold sold officially, e.g., gold sold by People’s Bank of China or International Monetary Fund.
With almost every province having gold reserve, China is one of the major gold-producing countries in the world. The gold production of China is focused on Shandong, Henan, Jiangxi, Fujian, Yunnan, etc.
China’s mineral gold output for 2010 was 340.88 ton, a year-on-year rise of 8.57%, and the highest in the world for four years in succession.
China’s Mineral Gold Output (ton)
Demand of Gold
Consumer Demand
The consumer demand of gold is in: jewelry industry, electronics industry, dentistry, official gold coin, gold stamp and imitation gold coin. Generally speaking, how fast the world economy grows determines the total industrial demand of gold. Although the substitutes of gold emerge now and then due to technological advances, the demand of gold is still on the rise for its special metalliciy.
The development of world economy determines the consumer demand of gold. Continued economic growth and improvement of people’s income and living condition result in the increased demand of gold jewelry and decoration. Currently jewelry demand accounts for over 40% of the total market demand. There is a tradition of gold consumption in Asia, especially in China and India which now enjoy rapid growth of economy and increase in people’s income.
Reserve Demand
The reserve demand of gold primarily refers to official reserve which is one of the important means to prevent financial risks by People’s Bank of China. As great political and economic power, Russia, China and Japan are small in the amount of gold reserve. By the end of 2010, China’s foreign exchange reserve had reached USD 2,847.338 billion, yet gold reserve only 1,054.1 ton, accounting for 1.7% of the total foreign exchange reserve of China, which was far lower than in developed European and American countries.
Investment Demand
The value-storing and value-maintaining characteristics of gold lead to its investment demand. Ordinary investors usually invest in gold for value-maintaining in the time of inflation. Additionally, investors can have price gains from the fluctuation of gold price.
Currently the political turbulence in some regions in the world and the unknown price trend of oil and US dollar result in the great fluctuation of gold price. As there are a big variety of physical gold and derivatives attached to gold, the investment value of gold is well presented and the investment demand of gold increases continually.
Factors Influencing Gold Price
Historical Trend of Gold Price
Historically, the international gold price was stable before the 1970’s. However, the price fluctuation has been frequent and bigger since the 1970’s, with the lowest price at USD 253.8/ounce (July 20, 1999) and the highest USD 1,430.2/ounce (December 7, 2010).
The soaring of gold price at the end of the 1970’s was primarily attributed to collapse of the Bretton Woods Regime. Due to the international reserve function of gold, the changes in international official gold reserve have a direct impact upon the fluctuation of international gold price. With the collapse of Bretton Woods Regime, floating exchange rate system made appearance on the historical stage. As a result, the currency function of gold was weakened, while its function as reserve assets was strengthened. The increase in the official gold reserve of all the countries led to the soaring of international gold price.
The central banks of all the countries have reconsidered the role of gold in foreign exchange reserve since the 1990’s. The increasingly independent and marketized central banks attached more importance to the income from reserve assets portfolio. Under these circumstances, gold, without any interest income (except for a few gains from the participation in the loan market), had a decline in its financial status. Some central banks decided to reduce gold reserve. Consequently, the gold reserve in 1999 was 10% lower than that in 1980. It was because of the selling of gold by major countries that the gold price remained subdued for a long time.
In the 21st century, with the gradual deepening economic and financial globalization, inflation came back and international gold price began to rise. Since the international financial crisis in 2008, the rapid increase in gold investment demand has made international gold price strike new highs repeatedly.
Influencing Factors
International Political Situation
Major international political and war events all can influence gold price. The great expenditure for wars or for the maintenance of stable domestic economic growth as well as political turbulence made a large number of investors turn to gold investment. The increased gold demand pushes the gold price to rise. World War II, Vietnam War, coup d'état in Thailand in 1976 and the Irangate scandal in 1986 all contributed to different rises of gold price. The 9/11 attacks in 2001 once made the gold price soar to the year high USD 300/ounce. Bu the influence of warfare on gold price needs overall considering as there were instances of gold price dropping in the war time in the history.
Exchange Rate of Major Currency in the World
USD exchange rate is one of the important factors influencing gold price fluctuation. As gold market price is denominated in USD, the appreciation of USD makes gold price drop while its depreciation drives the rise of the price. Whether USD is strong or weak enormously influences gold price. But in some special periods of time, especially when the gold trend is very strong or weak, gold price will be independent of USD.
Strong USD usually represents positive economic situation in the United States. As a result, its domestic stocks and bonds are favored by investor and the function of gold as a value-storing means is weakened. The decline of USD exchange rate is generally associated with inflation and depression in the stock market when the value-maintaining function of gold presents itself. The depreciation of USD and intensified inflation tend to stimulate the increase in the value-maintaining and speculative demand of gold. A retrospect of the past 20 years finds the international gold price drop when USD was strong to other western currencies. International gold price rose when USD depreciated. In the last 10 years, the trend of gold price and USD had an 80% inverse correlation.
COMEX黄金期货价格（美元/盎司）：COMEX Gold Futures Price (USD/Ounce)
COMEX黄金期货价格：COMEX Gold Futures Price
美元指数：USD Index
Supply-Demand Relationship of Gold
In terms of commodity attribute, the influence of the production and consumption of gold on gold price has been limited for a long time. However, in terms of financial attribute, owing to factors such as global liquidity surplus in recent years, the rapid increase in gold investment demand has great influence on gold price. Since the global financial crisis in 2008, the central banks of all the countries has been increasing gold reserve by various means instead of selling gold out of the worry about current global credit currency system and the need for diversified reserve assets. The change in the demand of official gold reserve exerts some influence on gold price.
Supply-Demand Relationship of Oil
As the major oil physical and futures market prices in the world are denominated in USD, the rise and fall of oil price reflects both the supply-demand relationship of oil in the world and the changes in USD exchange rate and the inflation rate in the world. Oil price interacts with gold price indirectly.
The comparison of the trend of international oil price and that of gold price shows that international gold price has positive correlation with crude oil futures price most of the time.
COMEX黄金期货价格（美元）：COMEX Gold Futures Price (USD)
COMEX黄金期货价格：COMEX Gold Futures Price
原油期货价格：Crude Oil Futures Price
原油期货价格（美元）：Crude Oil Futures Price (USD)
Other Factors
Apart from the above-mentioned factors influencing gold price, the level of open interest of trading fund of gold exchange (ETF) and so on exerts some influence on the trend of international gold price.
SHFE Standard Gold Contract and Related Regulations
Gold Contract and Appendix
Contract
|
Product |
Gold |
|
Contract Size |
1 kilogram/lot |
|
Price Quotation |
(RMB) Yuan /gram |
|
Minimum Price Fluctuation |
0.01 Yuan/gram |
|
Daily Price Limit |
Within 5% up or down of the settlement price of the previous trading day |
|
Contract Series |
From January through December |
|
Trading Hours |
9:00 am to 11:30 am, 1:30 pm to 3:00 pm (the Beijing Time) |
|
Last Trading Day |
The 15th day of the spot month (If it is a public holiday, the Last Trading Day shall be the 1stbusiness day after the holiday) |
|
Delivery Period |
The 5 consecutive business days after the last trading day |
|
Grade and Quality Specifications |
Domestic product: gold bullion with a fineness no lower than 99.95% (More details on quality specifications to be found in the Appendix) |
|
Delivery Venue |
Certified Delivery Warehouse of the SHFE |
|
Minimum Trade Margin |
7% of contract value |
|
Transaction Fee |
No higher that 0.02% of transaction amount (including provisions of risk) |
|
Settlement Type |
Physical Delivery |
|
Contract Symbol |
AU |
|
Exchange |
SHFE |
Appendixes to the Contract
1. Contract size and Minimum Warranted Delivery Size
The size of standard gold futures contract is 1kg/lot and the minimum warranted delivery size of 3kg.
2. Quality Specifications
(1) The gold bullion for the physical delivery of this contract should have a fineness no lower than 99.95%.
(2) The chemical constituents of domestic gold bullion should meet the following specifications:
|
Designation |
Chemical Constituent (Mass Fraction)/% |
|||||||
|
Au no lower than |
Impurity Content no higher than |
|||||||
|
Ag |
Cu |
Fe |
Pb |
Bi |
Sb |
Total |
||
|
Au99.99 |
99.99 |
0.005 |
0.002 |
0.002 |
0.001 |
0.002 |
0.001 |
0.01 |
|
Au99.99 |
99.99 |
0.02 |
0.015 |
0.003 |
0.003 |
0.002 |
0.002 |
0.05 |
See GB/T4134-2003 Standard for other specifications.
(3) The gold bullion for delivery is 1kg gold bullion (with a fineness no lower than 99.99% or 3kg gold bullion (with a fineness no lower than 99.95%).
(4) The overfilled and underfilled weight (net weight) of each 3kg gold bullion should be no more than 50g more or less. The weight (gross weight) of each 1kg gold bullion should be no less than 1kg. Whichever exceeds 1kg is counted as 1kg. The pound difference of each gold bullion should not exceed 0.1g.
(5) The gold for each warrant must be composed of gold bullion produced by the same enterprise with the same designation, registered trademark, quality grade and shape of piece.
(6) The gold bullion for each warrant must be the registered brand approved or certified by the SHFE and have corresponding quality certificate.
3. Manufacturers and Registered Brands Recognized by the SHFE
The gold bullion for physical delivery must be brand registered with the SHFE or the standard gold bullion produced by qualified suppliers or refiners recognized by LBMA that is certified by the SHFE. The specific registered brands and the rates of premium and discount will be prescribed and announced by the SHFE in due course.
4. Certified Delivery Warehouse
The certified delivery warehouse will be designated and announced by the SHFE in due course.
Key Points of Detailed Trading Rules
Futures trading refers to the trading activities for the centralized buying and selling of certain futures contract in a futures exchange.
1. The automatic computer matching system of the Exchange sequences trading orders in the principle of price priority and time priority. Trading price is a price coming from the automatic matching when the buy price is higher than or equal to the sell price. The concluded price after matching is the middle one of buy price, sell price and the last contracted price.
2. Trading order is divided into three types: limit order, cancel order and orders prescribed by the Exchange. For limit order the maximum order to be placed every time is 500 lots. The minimum order to be placed for trading order is 1 lot. The quote for the trading order can only be within the limit of price fluctuation.
3. The Exchange adopts trading code recording system. Trading code refers to the special code for futures trading between members and clients, which is divided into Non trading code for Futures-firm Member and that for client.
4. The Exchange provides members, client and the public with futures trading information on a real-time, daily, weekly, monthly and yearly basis.
Key Points of Detailed Settlement Rules
Settlement refers to the business activities for the calculation and transfer of members’ trading margin, gain or loss, transaction fee, delivery payment and other related amounts based on to trading results and the Exchange’s relevant regulations.
1. The Exchange opens a special settlement account at each depository and custodian bank to deposit members’ margin and related amount. Members should open special capital accounts at depository and custodian banks to deposit margin and related amount. The capital flow of futures business between the Exchange and members is handled through the special settlement account of the SHFE and the special capital accounts of members.
2. By adopting the Account Splitting Management over margins that members deposit in their special settlement accounts, the Exchange sets up subsidiary accounts for each member and registers and calculates their funds deposit and withdrawal, P&L, trading margin and transaction fee in order of day and time. By implementing the Account Splitting Management over margin that clients deposit in their special capital accounts, Futures-firm Members set up subsidiary accounts for each client and register and calculate their funds deposit and withdrawal, P&L, trading margin and transaction fee in order of day and time.
3. The Exchange adopts margin system. There are two types of margin, i.e., settlement margin and trading margin. Without being occupied by contract, settlement margin refers to the funds members prepare for trading settlement in the Exchange’s special settlement account in advance. Being already occupied by the contact, trading margin refers to the funds members deposit in the Exchange’s special settlement account to ensure contract fulfilment.
4. The Exchange adopts marked-to-market system under which after the closing of daily trade, the SHFE settles the gain and loss, trading margin, transaction fees, tax and so on using the settlement price of the day, transfers accounts receivable and payable in net amount at once, and increases or decreases member’s settlement margin correspondingly.
5. Members must make up the deficiency before the market opens on the next trading day if the settlement margin is lower than minimum balance after the settlement when the market is closed on a day. In case of failure to make it up, if the balance of settlement margin is lower than the minimum balance but higher than zero, such member is prohibited from opening a new position; if the balance of settlement margin is lower than the minimum balance but higher than zero, The Exchange will imposes “forced liquidation” according to the applicable risk control and management rules.
Key Points of Detailed Delivery Rules
Physical delivery refers to the process in which, at the expiration of a futures contract, both parties to a trade close out the matured open contract through the transfer of the ownership of the commodity as stated in the contract.
1. After the last trading day of the contract, the holders of all the open contracts should fulfil the contract by means of physical delivery. In the event a client conducts a physical delivery, it should be conducted by member in the name of such member at the Exchange. Natural person client is not allowed for physical gold delivery. When the market is closed on the 3rd trading day before the last trading day of a gold contract, open interests from natural person client trading in such gold futures contract should be 0 lot.
2. Delivery procedure
1st Delivery Day: The seller submits standard warrant. The seller submits to the Exchange the valid standard warrant with the storage fees fully paid off up to the 5th delivery date (including the 5th delivery day).
2nd Delivery Day: The Exchange allocates standard warrant.
3rd Delivery Day: The buyer pays and obtains the warrant and the seller collects the payment. The buyer must make the payment for goods and obtain standard warrant at the Exchange by 2:00 p.m. of the 3rd delivery day. The SHFE transfers the payment for goods to the seller by 4:00 p.m. of the 3rd delivery day.
4th and 5th Delivery Day: The seller submits the invoice.
3. The circulation procedures for physical delivery of standard warrant at the Exchange:
(1) Seller’s client entrusts seller member with standard warrant to conduct physical delivery;
(2) Seller’s member submits standard warrant to the Exchange;
(3) The Exchange allocates standard warrant to buyer’s member;
(4) Buyer’s member allocates standard warrant to buyer’s client.
4. Load-in and Load-out
(1) The consignor should conduct load-in declaration (delivery prediction) before shipping to certified delivery warehouse. The contents of load-in declaration include product, grade, quantity, shipper and intended delivery venue. In the event a client files a declaration, it should be handled by the duly appointed member.
(2) Considering the storage capacity and the willingness of the owner of the commodity, the Exchange requires that the consignor delivers gold to the warehouse within three business days. The consignor should make shipment to the certified delivery warehouse specified in the approved load-in declaration within the valid period as prescribed by the Exchange. Gold bullions loaded in without the approval by the Exchange or not within the prescribed valid period cannot be used for delivery.
(3) The certified delivery warehouse inspects the gold bullions and related documents and certificates as per relevant regulations when the bullions are delivered to the warehouse. There are two types of inspection, i.e., quality inspection and quantity inspection. The consignor should supervise and conduct the acceptance procedures at the certified delivery warehouse when the bullions are loaded in. The failure of the owner to supervise and conduct the acceptance procedures at the warehouse is deemed his/her approval of the inspection result by the certified delivery warehouse.
(4) After the load-in and acceptance check of the gold bullions, members submit the application for production of standard warrant to the Exchange. After passing the acceptance check, the Exchange notifies the certified delivery warehouse of issuing standard warrant in the standard warrant management system.
(5) The consignor should submit load-out application through standard warrant system and select delivery-taking location before taking delivery of the goods. The Exchange arranges warehouse for taking delivery within the delivery-taking location selected by the consignor and, within the five working days after the consignor submits the delivery-taking application, determines one of them as the shipment date. On one business day before the shipment date, the Exchange informs the consignor of the shipment date and changes the trading day into delivery notice day through the standard warrant management system, and the consignor should take delivery of gold at the warehouse within two working days after the shipment date.
When shipping the goods, the certified delivery warehouse should timely fill out the Confirmation Slips on Load-out of Standard Warrant (it is made in two copies with the consignor and the certified delivery warehouse holding one copy respectively) and well keep it for future check.
5. Delivery settlement, settlement of the overfilled and underfilled load-in and load-out and invoicing procedures
(1) The overfill and underfill refers to, at the time of deposit and withdrawal of gold bullions, the difference between the net weight of gold bullion for each warrant and the standard warrant weight (net weight). The positive difference is known as overfill and the negative difference as underfill. The Exchange settles the overfilleds and underfilled respectively on date of settlement of the overfilleds and underfilled (effective date of the warrant when gold bullion is loaded in or shipment notice day when gold bullion is loaded out). The special gold settlement invoice refers to the invoice (divided into three parts, i.e., invoice, settlement joint and stub) approved by competent tax authority for printing and used exclusively for gold delivery settlement and settlement of the overfilled and underfilled.
(2) Gold delivery settlement and invoicing procedures
① The delivery settlement of gold futures: the delivery settlement price for gold futures refers to the contract’s weighted average price of the volume-based concluded prices of the last five trading days with concluded deals. Both the buyer and seller make settlement by reference to the delivery settlement price for this contract.
② Delivery payment settlement: the delivery payment of the buyer and the seller is settled as per the standard weight of the warrant (net weight). The Exchange handles the settlement for members only. Buyer’s client must make the payment via buyer’s member, and seller’s client must receive the payment via seller’s member.
③ Delivery invoice: plain invoice is issued upon delivery.
④ Delivery invoice circulation: seller’s Non Futures-firm Member or client issues plain invoice to the Exchange who then issues the “special gold settlement invoice” to buyer’s Non Futures-firm Member or client and provides Non Futures-firm Member or client with the copy of “special gold settlement invoice” for settlement. The stub of “special gold settlement invoice” is retained by the Exchange.
⑤ Delivery of invoices and document between clients and the Exchange must be made via the member firm.
(3) Settlement of the overfilled and underfilled load-in gold and invoicing procedures
① Settlement of the overfilled and underfilled load-in: the overfilled and underfilled load-in gold is settled as per the settlement price of the most recent month gold contract listed on the Exchange on the business day prior to the date of settlement of the overfilled and underfilled load-in gold.
② Bill relating to the overfilled and underfilled: in the event of overfill, the gold-depositing enterprise issues plain invoice to the Exchange; in the event of underfill, the Exchange issues the “special gold settlement invoice” to the gold-depositing enterprise. The copy of “special gold settlement invoice” for settlement and the stub of “special gold settlement invoice” are retained by the Exchange.
③ The computational formula for payment for settlement of the overfilled and underfilled:
Payment for settlement of the overfilled and underfilled = overfill and underfill * the settlement price of the most recent month gold contract listed on the Exchange on the business day prior to the date of settlement of the overfilled and underfilled
(4) Settlement of the overfilled and underfilled load-out gold and invoicing procedures
① Settlement of the overfilled and underfilled load-out of the undelivered standard warrant for taking a delivery: when members or clients (consignee) take delivery of goods for the undelivered standard warrant they hold, the overfilled and underfilled is settled as per the settlement price of the most recent month gold contract listed on the Exchange on the business day prior to the date of settlement of the overfilled and underfilled. In the event of overfill, the Exchange issues the invoice of “special gold settlement invoice” to the consignee, while the copy of “special gold settlement invoice”for settlement and the stub of “special gold settlement invoice” are retained by the Exchange; in the event of underfill, the consignee issues plain invoice to the Exchange.
②Settlement of the overfilled and underfilled load-out of the delivered standard warrant for taking a delivery: when members or clients take delivery of goods for the delivered standard warrant they hold, the overfilled and underfilled is settled as per the settlement price of the most recent month gold contract listed on the Exchange on the business day prior to the date of settlement of the overfilled and underfilled. On the basis of the Delivery Settlement Documents, Confirmation Slips on Load-out of Standard Warrant, Document of Settlement of the Overfilled and Underfilled provided by buyer’s member and client, the competent tax authority issues, on the Exchange’s behalf, the copy of VAT invoice for deduction to buyer’s members or clients as per the actual delivery payment(consisting of delivery payment and payment for settlement of the overfilled and underfilled) and the quantity of goods that was taken.The VAT invoice and its copy for bookkeeping are retained by the Exchange. VAT invoice is not issued to the consignee’s member firms or clients who are non-VAT general taxpayer.
③The computational formula for payment for settlement of the overfilled and underfilled:
Payment for settlement of the overfilled and underfilled = overfill and underfill * the settlement price of the most recent month gold contract listed on the Exchange on the business day prior to the date of settlement of the overfilled and underfilled
(5) When buyer’s member or client takes delivery of goods, the actual delivery payment is composed of delivery payment and payment for settlement of the overfilled and underfilled, among which the delivery payment is determined with LIFO principle.
Key Points of Risk Management System
Margin System
The Exchange adopts trading margin system. The minimum trading margin of gold futures contract is 7% of the contract value.
The Exchange adjusts trading margin based on different open interests in gold futures contract. The specific methods are as below:
Margin requirements differentiated according to the size of open interest (OI) in gold futures contract
|
As from the 1st trading day of the 3rd month before the delivery month, when the total open interests (X) reach the following: |
Margin rate |
|
X≦80,000 |
7% |
|
80,000＜X≦100,000 |
8% |
|
100,000＜X≦120,000 |
10% |
|
X＞120,000 |
12% |
Note: X denotes the total bilateral OIs (in lots) for the contract of one month.
During the trading, the margin requirements will not be adjusted temporarily when the OI in one gold futures contract reaches the total OIs for one level. If, at daily settlement, OI in one gold futures contract reaches the total OIs for one level, the Exchange will collect the trading margin corresponding to total OIs for this level for total OIs in this contract. Any deficiency in the margin should be made up by the market opening on the next trading day.
The Exchange adjusts trading margin for different operational stages of futures contract (from the day when the contract is listed till the last trading day) as follows:
Margin requirements differentiated according to the stage at which gold futures contract is listed and operated.
|
Trading Period |
Gold Trading Margin Percentage |
|
From the day when the contract is listed |
7% |
|
From the 10th trading day of the 2nd month before the delivery month |
10% |
|
From the 1st trading day of the 1st month before the delivery month |
15% |
|
From the 10th trading day of the 1st month before the delivery month |
20% |
|
From the 1st trading day of the delivery month |
30% |
|
From two trading days before the last trading day |
40% |
If, pursuant to relevant rules of the Exchange, two or more than two margin rates are applicable to one contract at the same time, then the highest rates shall prevail.
When gold futures contract reaches to the extent that adjustment to trading margin shall be made, the Exchange should settle all the historical open positions in the contract using new margin rate when making settlement on one trading day before the execution of the new rate. Any deficiency in the margin should be made up by the market opening on the next trading day. After entering the delivery month, the seller can use standard warrant as the contract performance guarantee of OI in the delivery month futures contract whose quantity is the same as that shown on the warrant, and the trading margin corresponding to such OI is no longer collected.
Position Limit System
Position limit refers to the maximum amount of speculative position for one contract on one side that can be held by members or clients as regulated by the Exchange.
The position limit percentage and OI limit of the gold futures contract of Futures-firm Member, Non Futures-firm Member and client in different periods of time are as follows:
The requirements on price limit ratio and OI limit for gold contract in different periods of time (in lots)
|
From the day when the contract is listed till the last trading day of the 2nd month before delivery month |
The 1st month before delivery month |
Delivery month |
||||||||
|
Position of one futures contract |
Position limit percentage (%) |
|||||||||
|
Futures-firm Member |
Non Futures-firm Member |
Client |
Futures-firm Member |
Non Futures-firm Member |
Client |
Futures-firm Member |
Non Futures-firm Member |
Client |
||
|
Gold |
≧80,000 |
15 |
10 |
5 |
900 |
300 |
90 |
300 |
90 |
30 |
Note 1: The OI in one futures contract is bilaterally calculated, and the OI limit of Futures-firm Member, Non Futures-frim Member and client is one-sided; the OI limit of Futures-firm Member is the base.
Note 2: The OI in gold futures contract of natural person client should be zero lot when the market is closed on the 3rd trading day before the last trading day of the contract.
One client has several trading codes with different Futures-firm Members. The total position for all the trading codes is not allowed to exceed the position limit of a client. Before the market closing on the last trading day of the 1st month before the delivery month, the OI in gold futures contract of each member and client with each member should be adjusted to an integral multiple of three (3) lots. After entering the delivery month, the OI in gold contract of members and clients, as well as newly opened position and close-out position should be an integral multiple of three (3) lots; The OI in gold futures contract of natural person client should be zero lot when the market is closed on the 3rd trading day before the last trading day of the contract.
Price Limit System
The Exchange adopts price limit system in which the daily maximum price fluctuation of each listed futures contract is established by the Exchange. In the trading of gold futures contract, the Exchange may adjust the price limits based on market risk in the event of the following:
(1) Consecutive Price Limit hits in the same direction;
(2) There is long national holiday;
(3) Increased potential market risk which the Exchanges deems as significant;
(4) Other cases in which the SHFE deems it necessary.
In the event of two or more than 2 price limits that apply to relevant regulations of the Exchange, the highest value shall prevail.
When the cumulative increase or decline of one gold contract reaches 10% for three consecutive days, or 12% for four consecutive days, or 14% for five consecutive days, the Exchange may take one or more measures in the following based on market conditions: raise trading margin on one side or two sides, by the same percentage or different ones, for part of members or all the members; limit the funds withdrawal by part of members or all the members; suspend new position opening by part of members or all the members; adjust price limit; close out positions within a given time and close out positions forcibly. But the adjusted price limit should not exceed 20%.
When consecutive price limit hits in the same direction (upward and downward) occur to one gold contract without continuous unilateral quote, the Exchange will take corresponding measures according to the Rules on Risk Control and Management.
Occurrence of consecutive price limit hits in the same direction (upward and downward) to gold futures contract
D1停板5%：D1 Lock Limit 5%
D2停板7%：D2 Lock Limit 7%
D3停板9%：D1 Lock Limit 9%
结算时交易保证金 10%：Trading margin at the time of settlement12%
结算时交易保证金 12%：Trading margin at the time of settlement12%
结算时交易保证金 12%：Trading margin at the time of settlement12%
If the margin that has been collected for D1 (D2, D3) is higher than 10% (12%, 12%), it should be collected by the original percentage; if the price limit is higher than 7% (9%) for D1 (D2), the price limit for D2 (D3) should be determined based on D1 (D2).
If D3 is the last trading day, the contract goes into delivery directly; if D4 is the last trading day, the price limit n and margin requirements for D4 are determined based on D3; otherwise, D4 will be changed as one market closure day and the SHFE announces solution as per relevant rules .
The above is for reference. See the Rules on Risk Control and Management for detailed regulations.
Large Trader Reporting System
When the speculative position of one contract on one product held by members or clients reaches 80% of the speculative position limit as prescribed by the Exchange, they should report the information on their funds and positions to the Exchange. Clients must report via Futures-firm Members. The Exchange may establish and adjust the position disclosure threshold based on the potential market exposures.
Forced Liquidation System
Forced liquidation refers to the coercive measure whereby the Exchange imposes liquidation upon relevant position held by members and clients when they violate rules. In the event of any of the following on the part of members or clients, the SHFE may impose forced liquidation upon them :
(1) The balance of member’s settlement margin is lower than zero and the failure to make up such insufficiency within the prescribed time limit;
(2) OI exceeds position limit;
(3) Failure to adjust the OI to the integral multiple as required within the prescribed timeline;
(4) Penalized by the Exchange for rules-violation such as the imposition of forced liquidation;
(5) Forced liquidation shall be imposed by virtue of the Exchange’s emergency measures;
(6) Other cases in which forced liquidation is required.
Risk Warning System
In case where the Exchange considers it necessary, it may warn and mitigate risk by taking one or multiple measures, respectively or concurrently: request of report, conversation reminder, written warning, denouncement and issuance of risk warning announcement.
Key Points of Detailed Hedging Rules
1. The application for gold hedging position should be submitted by the 20th day of the month before the hedging contract delivery month. In case of exceeding the time limit, the Exchange will not accept any hedging application for contract with such delivery month. Hedgers can apply for the hedging line for contracts with multiple delivery months at once.
2. Traders who have been granted the permission to participate in hedging trade should open positions as per approved trading position and line within the position opening time limit as approved by the Exchange (the last trading day of the month before the hedging contract delivery month is the latest). The failure to open positions within the prescribed time limit is deemed a waiver of the hedging line.
3. The hedging line is not allowed to be used repeatedly from the 1st trading day of the month before the delivery month.
Appendix 1: Registered Trademark and Packaging Standard of SHFE Gold Bullion
| No. | Registered Enterprise | Registration Date | Trademark | Smeltery Address | Outline Dimension (mm) | Weight per piece (kg) | Designa-tion |
|---|---|---|---|---|---|---|---|
|
1 |
China National Gold Group Corporation |
2007.12 |
Zhongjin |
Sanmenxia, Henan Province |
115±1*52.5±1 |
1 |
Au99.99 |
|
320±2*70±2 |
3 |
Au99.99 |
|||||
|
3 |
Au99.95 |
||||||
|
2 |
Shandong Gold Mining Co., Ltd. |
2007.12 |
Taishan |
Laizhou, Shandong Province |
115±1*52.5±1 |
1 |
Au99.99 |
|
320±2*70±2 |
3 |
Au99.99 |
|||||
|
3 |
Au99.95 |
||||||
|
3 |
Shandong Zhaojin Gold and Silver Refining Co., Ltd. |
2007.12 |
Zhaojin |
Zhaoyuan, Shandong Province |
115±1*52.5±1 |
1 |
Au99.99 |
|
320±2*70±2 |
3 |
Au99.99 |
|||||
|
3 |
Au99.95 |
||||||
|
4 |
Zijin Mining Group Co., Ltd. |
2007.12 |
Zijin (Pattern) |
Shanghang, Fujian Province |
115±1*52.5±1 |
1 |
Au99.99 |
|
320±2*70±2 |
3 |
Au99.99 |
|||||
|
3 |
Au99.95 |
||||||
|
5 |
Lingbao City Jin Yuan Tong Hui Refining Co. Ltd. |
2007.12 |
Lingbaojin |
Lingbao, Henan Province |
115±1*52.5±1 |
1 |
Au99.99 |
|
320±2*70±2 |
3 |
Au99.99 |
|||||
|
3 |
Au99.95 |
||||||
|
6 |
Jiangxi Copper Co., Ltd. |
2007.12 |
Jiangtong |
Guixi, Jiangxi Province |
115±1*52.5±1 |
1 |
Au99.99 |
|
320±2*70±2 |
3 |
Au99.99 |
|||||
|
3 |
Au99.95 |
||||||
|
7 |
Yunnan Copper Co., Ltd. |
2007.12 |
Tiefeng |
Kunming, Yunnan Province |
115±1*52.5±1 |
1 |
Au99.99 |
|
320±2*70±2 |
3 |
Au99.99 |
|||||
|
3 |
Au99.95 |
||||||
|
8 |
Tongling Nonferrous Metals Group Co., Ltd. |
2007.12 |
Tongguan |
Tongling, Anhui Province |
115±1*52.5±1 |
1 |
Au99.99 |
|
320±2*70±2 |
3 |
Au99.99 |
|||||
|
9 |
China Daye Non-Ferrous Metals Mining Limited |
2007.12 |
Dajiang |
Huangshi, Hubei Province |
115±1*52.5±1 |
1 |
Au99.99 |
|
320±2*70±2 |
3 |
Au99.99 |
|||||
|
10 |
Yunnan Geology and Mineral Resources Inc. |
2008.5 |
Dianjin |
Kunming, Yunnan Province |
115±1*52.5±1 |
1 |
Au99.99 |
|
320±2*70±2 |
3 |
Au99.99 |
|||||
|
11 |
Lingbao Gold Co., Ltd. |
2008.11 |
Lingjin |
Lingbao, Henan Province |
320±2*70±2 |
3 |
Au99.95 |
Note: See SHFE announcement for the list of qualified suppliers or refiners recognized by LBMA that is certified by the SHFE.
Appendix 2: SHFE Certified Delivery Warehouse
| No. | Name of Certified Delivery Warehouse | Storage No. | Storage Name | Address | Telephone | Contact Person |
|---|---|---|---|---|---|---|
|
1 |
Industrial and Commercial Bank of China Ltd. |
1-1 |
Business Department of Industrial and Commercial Bank of China, Beijing Branch |
Block B, Tianyin Building, No. 2, Fuxingmen South Street, Beijing 100031 |
010-66410615 |
Liu Wei |
|
1-2 |
Casher’s Section of Business Department of Industrial and Commercial Bank of China, Shanghai Branch |
24 No. 1 East Zhongshan Road, Shanghai 200002 |
021-63215820 63211678*1038 |
Zhou Caidong Zhu Jie Wu Jie |
||
|
1-3 |
Clearing Center of Industrial and Commercial Bank of China, Shenzhen Branch |
Room 1610, North Block, East Shennan Road Financial Center, Shenzhen 518015 |
0755-82246264 |
Zhang Shibiao |
||
|
1-4 |
Industrial and Commercial Bank of China, Guixi Subbranch |
38 Xiongshi Avenue, Guixi, Jiangxi Province 335400 |
0701-3791705 |
Peng Lihua |
||
|
1-5 |
Central Treasury of Business Department of Industrial and Commercial Bank of China, Sanmenxia Branch |
40 Xiaoshan Road, Sanmenxia City, Henan Province 472000 |
0398-2936811 |
Wang Gang |
||
|
1-6 |
Industrial and Commercial Bank of China, Sanmenxia Branch, Lingbao Subbranch |
20 Jincheng Avenue, Lingbao, Henan Province 472500 |
0398-8861995 |
Jia Fujun |
||
|
1-7 |
Industrial and Commercial Bank of China, Longyan Branch |
47 South Jiuyi Road, Xinluo District, Longyan City, Fujian Province 364000 |
0597-2224619 |
Liao Qingzhang |
||
|
1-8 |
Industrial and Commercial Bank of China, Longyan Branch, Shanghang Subbranch |
East Section of North Ring Road, Shanghang County, Longyan City, Fujian Province 364200 |
0597-3843087 |
Qiu Guojun |
||
|
1-9 |
Industrial and Commercial Bank of China, Zhaoyuan Branch |
95 Kuixing Road, Zhaoyuan City, Shandong Province 265400 |
0535-8224694 |
Zhang Guicai |
||
|
1-10 |
Industrial and Commercial Bank of China, Laizhou Branch |
88 Gucheng Street, Laizhou City, Shandong Province 261400 |
0535-2211315 |
Hu Qingfang |
||
|
1-11 |
Industrial and Commercial Bank of China, Luoyang Branch |
230 Middle Zhongzhou Road, Luoyang, Hennan Province 471000 |
0379-63336969 |
Hai Jianwei |
||
|
1-12 |
Industrial and Commercial Bank of China, Wuhan Jiangan Branch |
998 Zhongshan Avenue, Wuhan, Hubei Province 430014 |
027-82219376 027-82219375 |
Wang Fang Cai Jun |
||
|
2 |
China Construction Bank Corporation |
2-1 |
Railway Sub-treasury of Cash Distribution Management Center of China Construction Bank |
Railway Subbranch, Dongpei Building, North Square, West Railway Station, Beijing 100055 |
010-51996841 |
He Zheng |
|
2-2 |
China Construction Bank, Shanghai Branch |
900 Lujiazui Ring Road, Shanghai 200120 |
021-58880000*1311 |
Gao Xinhai |
||
|
2-3 |
China Construction Bank, Shenzhen Branch |
East Block, South Hongling Road Financial Center, Shenzhen, Guangdong Province 518031 |
0755-82488307 |
Li Zhihua |
||
|
2-4 |
China Construction Bank, Auhui Tongling Branch |
41 West Changjiang Road, Tongling, Anhui Province 244000 |
0562-2820013 |
Wang Wenze |
||
|
2-5 |
China Construction Bank, Henan Sanmenxia Branch |
52 Xiaoshan Road, Sanmenxia City, Henan Province 472000 |
0398-2985036 |
Lu Quncai |
||
|
2-6 |
China Construction Bank, Henan Lingbao Subbranch Treasury |
7 Western Section, Jincheng Avenue, Lingbao City 472500 |
0398-8869166 |
Yao Baishan |
||
|
2-7 |
China Construction Bank, Shandong Yantai Branch |
9 South Street, Yantai, Shandong Province 264001 |
0535-6603087 |
Wang Qingguo |
||
|
2-8 |
China Construction Bank, Fujian Longyan Branch |
111 North Jiuyi Road, Longyan City, Fujian Province 364000 |
0597-2239529 |
Zhang Fuqiang |
||
|
2-9 |
China Construction Bank, Fujian Branch, Shanghang Subbranch |
261 North Ring Road, Linjiang Town, Shanghang County, Longyan City, Fujian Province 364200 |
0597-3843041 |
Jiang Tao |
||
|
3 |
Bank of Communications Co., Ltd. |
3-1 |
Bank of Communications, Beijing Branch |
33 Financial Street, Western City District, Beijing 100032 |
010-66101662 |
Hai Feng |
|
3-2 |
Bank of Communications, Shanghai Branch |
158 Dongyuan Road, Shanghai 200120 |
021-63111000*2847 |
Li Ying |
||
|
3-3 |
Bank of Communications, Shenzhen Branch |
Bank of Communications Building, 3002West Hongli Road, Futian District, Shenzhen 518028 |
0755-83680283 |
Zhou Shaoyun |
||
|
3-4 |
Bank of Communications , Yunnan Branch |
67 Huguo Road, Kunming, Yunnan Province 650021 |
0871-3107221 |
Wang Li |
||
|
4 |
Bank of China Ltd. |
4-1 |
Bank of China, Shanghai Branch |
23 No. 1 East Zhongshan Road, Shanghai 200002 |
021-63291331 |
Gan Yimin |
|
4-2 |
Bank of China, Shenzhen Branch |
International Financial Building, 2022 Jianshe Road, Shenzhen 518001 |
13798311383 |
Nie Yinzhu |
||
|
4-3 |
Bank of China, Laizhou Subbranch |
733 North Laizhou Road, Laizhou City, Shandong Province 261400 |
0535-2232071 |
Dong Wu |
||
|
4-4 |
Bank of China, Zhaoyuan Subbranch |
78 Fuqian Road, Zhaoyuan City, Shandong Province 265400 |
0535-8210553 |
Kao Shaoxia |
||
|
4-5 |
Bank of China, Fujian Branch |
136 Wusi Road, Fuzhou, Fujian Province 350003 |
0591-87090636 |
Li Feng |
||
|
4-6 |
Bank of China, Sanmenxia Branch |
15 East Xiaoshan Road, Sanmenxia City, Henan Province 472000 |
0398-2828946 |
Su Lixin |
||
|
4-7 |
Bank of China, Lingbao Subbranch |
10 Jincheng Avenue, Lingbao City, Henan Province 472500 |
0398-8850603 |
Chen Jing |
Appendix 3: Storage and Transportation Fees of Gold Futures
| Item | Fees Standard |
|---|---|
|
Load-in Fee |
RMB 2/kg |
|
Load-out Fee |
RMB 2/kg |
|
Dispatching fees for load-in |
RMB 0.04/g |
|
Dispatching fees for load-out |
RMB 0.07/g |
|
Storage Fee |
RMB 1.8/kg*day |
Note: The Exchange will subject the storage and transportation fees to market developments, and issue relevant notice in due course.
SHANGHAI FUTURES EXCHANGE
http://www.shfe.com.cn
This operational manual is for reference only. For updates please call relevant departments of Shanghai Futures Exchange at 8621-68400000 or visit http://www.shfe.com.cn.
Address: 500 Pudian Road, Pudong New Area, Shanghai 200122
Telephone: 8621-68400000
Fax: 8621-68401198
Website: http://www.shfe.com.cn
SHANGHAI FUTURES EXCHANGE
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