China has been gradually opening up its financial exchanges to access by foreigners. Last September two key commodity exchanges announced a wider range of products available under the Qualified Foreign Institutional Investor scheme.
In December, the Dalian Commodity Exchange opened up its soy complex while in January, the Zengzhou Commodity Exchange added access to three more contracts including rapeseed oil. "The rationale for doing this was really to allow arbitrage clients to move variation margin profits from mainland China," Sucden Financial Chief Executive Marc Bailey told Reuters.
Investors pay variation margins to reflect daily changes in the market value of futures contracts.
"Clients can have Chinese and Western futures on the same screen and the ability to convert renminbi very quickly from the mainland Chinese exchange to London within a few hours," he added. Previously arbitrage clients had to have separate accounts for Chinese and Western futures while in some cases they traded over the counter (OTC) "look alike" contracts formulated by banks, Bailey said. "Some arbitrage clients found themselves in a situation where they had a renminbi profit and a dollar loss and they couldn't move the two," he added. Sucden Financial is now an overseas intermediary of the Dalian and Zhengzhou exchanges as well as the Shanghai International Energy Exchange, going live last week. A total of 25 Chinese commodity contracts are available, including crude oil, copper, iron ore, soybeans and rapeseed oil. Sucden is also a ring-dealing member of the London Metal Exchange and offers access to the CME Group's metals and agricultural futures. (Reporting by Eric Onstad; Editing by Chizu Nomiyama)
