Zhengzhou Commodity Exchange: Does Lightning Growth Signal Economic Prosperity In China?


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The Zhengzhou Commodity Exchange is a futures exchange in China that specializes in agricultural and chemical commodity products. In this guide, you’ll learn how Zhengzhou is organized, what is traded on the exchange, and how it’s regulated.

What is the Zhengzhou Commodity Exchange?

Zhengzhou Commodity Exchange (ZCE) is a securities exchange in China that operates a marketplace for trading, clearing and settling agricultural and other commodities futures and options.

ZCE is one of four futures exchanges in China and one of three that deals in commodities. It was the first pilot futures market to receive regulatory approval by China’s State Council.

ZCE is one of the top ten global commodity exchanges ranked by trading volume. In terms of growth in trading volume, ZCE is one of the fastest-growing major commodities exchanges in the world.

By the end of September 2020, ZCE realized a year-on-year growth of 29.8% in trading volume to 1.1 billion contracts. In the same period, it recorded a year-on-year growth of 25.43% in notional value to 38.6 trillion RMB.

ZCE offers all of the features found in modern futures exchanges including electronic systems for trading, delivery, clearing, risk control, news releases, and member services.

Zhengzhou Exchange Homepage

What Is Traded on the ZCE?

ZCE products fall into three categories:

All futures contracts on ZCE are settled with physical delivery.

CategoryProductsContract Size (per lot)Minimum Trading Margin
Agricultural
Wheat Icon
Strong gluten wheat and common wheat20 metric tons5%
Cotton #15 metric tons5%
White sugar10 metric tons5%
Rapeseed, rapeseed oil, and rapeseed meal10 metric tons5%
Early rice, Japonica rice, late Indica rice20 metric tons5%
Cotton yarn5 metric tons5%
Fresh apple10 metric tons7%
Chinese jujube5 metric tons7%
Non-Agricultural
Chemical Icon
Pure Terephthalic Acid (PTA)5 metric tons5%
Flat glass20 metric tons5%
Thermal coal100 metric tons5%
Methanol 10 metric tons5%
Urea20 metric tons5%
Soda ash20 metric tons5%
Ferroalloy 5 metric tons5%
Polyester staple fiber5 metric tons5%
Options
Sugar Icon
White sugar, cotton #1, PTA, methanol, rapeseed meal, thermal coalCalls and puts on the future contractsN/A

How is ZCE Regulated?

ZCE is regulated by the China Securities Regulatory Commission (CSRC), but is also a self-regulatory organization in that it oversees the regulation of the exchange and clearing house it operates in accordance with the Zhengzhou Commodity Exchange Constitution and Zhengzhou Commodity Trading Rules.

It conducts regulatory activities with the principles of “openness, fairness, justness and good faith.”

ZCE performs its functions according to laws set out in China’s securities ordinance Futures Trading Management Ordinance, Futures exchanges Regulation.

Other laws and regulations that pertain to securities markets and trading in China include:

  1. Individual Income Tax Law of the People’s Republic of China
  2. Regulation on the Administration of Futures Trading
  3. Rules on Risk Disposal of Securities Companies
  4. Enterprise Income Tax Law of the People’s Republic of China
  5. Property Law of the People’s Republic of China
  6. Anti-Money Laundering Law of the People’s Republic of China
  7. Enterprise Bankruptcy Law of the People’s Republic of China
  8. Law of the People’s Republic of China on Funds for Investment in Securities

You can find the specific text of these laws in the Laws and Regulations section of the ZCE website.

History of the Zhengzhou Commodity Exchange

Zhengzhou has a long history as a center of trade and commerce in Asia. However, ZCE was not established until 1990.

In the 1980s, wide-ranging economic reform programs implemented by China’s premier Deng Xiao Ping led to the liberalization of markets.

By 1988 the Research Group of China set up the Zhengzhou Grain and Oil Futures Market, which was the first formal commodities trading market in communist China.

In July 1990, the State Council approved the renamed Zhengzhou Grain Wholesale Market (CZGWM) to run on an experimental basis.

By August 1990, China established the Regulatory Commission of China to oversee the exchange. The Governor of Henan Province, where Zhengzhou is located, became the first Chairman of the commission.

By October 1990, CZGWM opened for business and commenced auction trading for cash grain and oil.

Key Events in the History of ZCE

EventYearCommentary
China’s first forward contract1991Signed under the organization and supervision of CZGWM
Regulation1992The Futures Trading Regulation of China Zhengzhou Commodity Exchange (CZCE) begins
New entity formed1993ZCE formally commences operations as a futures exchange and launches contracts on wheat, corn, soybeans, green bean and sesame.
New trading and systems1994
  • Afternoon trading sessions begin
  • New listings in peanut kernel, soybean meal, red bean, rice, 5-year and 2-year Treasury notes, aluminum and cotton
  • New computer system implemented for trading and clearing
  • Membership 1995Joins International Options Market Association and begins remote trading operations
    Technology1997Begins electronic management of clearing data
    Exchange for Physical (EFP)2001Executes first successful EFP with hard white winter wheat
    Technology2002Introduces electronic systems for capital management
    Cooperative Agreement2005Signs Memorandum of Understanding (MOU) with Chicago Mercantile Exchange (CME)
    Cooperative Agreement2008Signs MOU with NYSE-Euronext.
    Cooperative Agreement2014Signs MOU with energy market exchange operator TMX Group
    New Product2017Launches white sugar option trading after receiving regulatory approval

    FAQs

    Below are some answers to commonly-asked questions about the Zhengzhou Commodity Exchange.

    How Does the ZCE Conduct Trading?

    ZCE members have access to a fully operational electronic platform that incorporates trading, delivery, clearing and risk controls.

    Members and traders can directly input their own orders on the platform. The platform also delivers relevant information such as market news and changes in exchange rules.

    News outlets including Reuters, Bloomberg, and Shihua release information about trades executed on the exchange.

    How is the Zhengzhou Commodity Exchange Organized?

    The General Assembly is the governing body of ZCE and consists of all exchange members. The Board of Directors is a standing body that oversees policies of the exchange.

    The ZCE Board of Directors consists of a Chairman and 15 directors – nine member directors and six non-member directors. The Office of the Board of Directors is the standing and functioning body for the Board.

    The Board of Directors is divided into 10 special committees that oversee specific areas of the exchange operations:

    1. Strategic Development
    2. Product
    3. Supervision
    4. Trading
    5. Delivery
    6. Member Qualification Examination
    7. Arbitration
    8. Finance
    9. Technology
    10. Clearing

    ZCE also has a President, who serves as the legal representative for the exchange. Under the President’s supervision are the vice president and 19 departments that perform different tasks depending on the business needs of the exchange.

    Does the ZCE Require Membership?

    ZCE adopts a membership system for trading on the exchange. By the end of 2017, ZCE had 164 members.

    Members come from 26 provinces and autonomous regions across China. They comprise both futures trading company participants (about 91% of members) and non-futures company accounts (about 9% of members).

    What Are the ZCE’s Margin Requirements?

    ZCE has outlined its rules concerning margin requirements for positions and portfolios in a document entitled Detailed Rules for Futures Clearing of Zhengzhou Commodity Exchange.

    Generally, the rules are consistent with how other futures exchanges handle margin. Traders are required to deposit an initial margin when opening a position. The exchange allows offsets for positions that reduce risk and may require additional margin to keep positions open.

    What Market Data Does ZCE Provide?

    ZCE makes the following market data available to members and the public:

    Trading Data

    ZCE provides daily, weekly and monthly reports for each contract month and each commodity traded on the exchange.

    The reports contain the following information

    1. Previous Settlement
    2. Open
    3. High
    4. Low
    5. Close
    6. Settlement
    7. Change
    8. Volume
    9. Open interest
    10. Open interest change
    11. Turnover
    12. Delivery settlement price

    Historical Data

    Traders can download historical data in text format or excel spreadsheets.

    Traders can download this data in the Market Data section of the exchange website.

    What Educational Materials Does ZCE Offer?

    ZCE offers online training course for each product traded on the exchange. Traders can obtain more information about these courses and the software requirements for viewing them in the online training course section of the ZCE website.

    ZCE also offers detailed product brochures for each commodity.

    Does ZCE Have Vendor Partners?

    ZCE works with data distributors in China and around the world. Thomson Reuters and Bloomberg are among the 18 data distributors the exchange lists as its partners.

    You can obtain a complete list of these distributors in the Market Data section of the ZCE website.

    How to Start Trading

    Many regulated brokerage firms offer access to options, CFDs and other trading products based on commodities on the Zhengzhou Commodity Exchange, such as wheat, coal, and ferroalloys.

    Traders in can open accounts at one of these regulated online brokers to begin trading.

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