Shanghai to let foreigners buy crude oil futures
Exchange to launch product this year in move to allow overseas players access in the market
The Shanghai Futures Exchange plans to launch crude oil futures this year, moving a step closer to opening up the mainland's futures trading market to foreign investors.
The exchange's chairman, Yang Maijun, said the rules for trading crude oil would be set to allow foreign investors to take part.
Crude oil futures contracts would be priced excluding capital gains taxes and custom duties, which are currently included in the prices of other futures products, he said.
Ten products, mostly precious metals futures contracts, are currently trading on the exchange and limited to mainland investors.
Yang said: "It is an international practice to exclude taxes in pricing. The crude oil futures prices in Shanghai will therefore be more comparable to the same product trading on exchanges in New York and London.
"No taxes will be charged if the crude oil is not imported into the mainland."
Yang said that it would be more convenient for domestic and foreign investors to settle in physical delivery.
"We hope to open up the trading platform to institutional investors and financial institutions overseas," he said.
Introducing foreign players would be the first step for the exchange to become more internationalised, Yang said.
Hong Kong Exchanges and Clearing, the operator of the Hong Kong stock exchange, recently completed the takeover of the London Metal Exchange, which Yang said was a good precedent for the Shanghai Futures Exchange.
However, he said, it was too early for the Shanghai exchange to consider overseas acquisitions until it reached similar standards to the Hong Kong bourse operator in terms of policies and other areas.
Preparation for the sale of crude oil futures contracts has been done, but Yang said the launch of the product would depend on the approval of the State Council and other authorities such as the General Administration of Customs, the tax bureau and the foreign exchange regulator. "We hope that crude oil futures can be launched very soon, it's possible in this year," he said.
Yang said crude oil futures might not be the first product that would be opened up to foreign investors. "If approved, our precious metal futures products are also mature enough to allow the participation of foreign investors," he said.
Whether the futures contracts would be denominated in yuan or US dollars had yet to be decided, but the exchange had prepared for both, Yang said. "Renminbi will be more appropriate, but this is not decided by the exchange," he said.
The mainland is the world's second-largest consumer of crude oil and imported 271 million tonnes of crude oil last year, according to the General Administration of Customs.
Yang said the country needed a price reference which could reveal the demand and supply in crude oil.
The price of the crude oil futures contracts could also be used as a reference for the mainland's fuel price setting mechanism, he said.