A Chinese
Sugar Option – the Zhengzhou Commodity Exchange hopes to launch a Sugar Options
Contract in 2016.
by Jane Yang, Bob Meara and David Nealis of Ceres Ltd
Over the last
12 months we have seen some major changes in the Chinese capital markets
industry including a recent surge in Futures prices in China.
For those of
us involved in the Chinese capital markets industry all too often we have heard
about potential products being launched and with patience we are still waiting
for some of them like the Crude oil contract to be traded in the Shanghai FTZ
that potentially would include non-Chinese traders which would be ground
breaking in China.
And we have experienced products and policies
being taken away over the last 12 months.
In the midst
of this comes the hope of a Sugar Options contract launched by the Zhengzhou
Commodity Exchange (ZCE). Currently
there is only one options contract traded in China (the World’s 2nd
largest economy), which is the SSE50 ETF option.  |
| Jane Yang and David Nealis of Ceres Ltd on the CME trading floor |
Zhengzhou
Commodity Exchange (ZCE) has claimed that they are fully prepared to launch it
anytime once they get final permission from CSRC (Chinese Security Regulation
Commission.
ZCE
is one of the four futures exchanges in China. The products traded in the exchange
are mostly agriculture products; wheat, rice, cotton and sugar contracts among
others are traded there.For those who don’t trade sugar here is a quick macro picture of sugar around the world:
·
The
world top 5 sugar producing countries are Brazil 38.7MT (Metric Ton), India 26
MT, China 11.4 MT, Thailand 10.6 MT and US 7.2 MT.
·
The
top 5 importing countries are Philippines, Nigeria, EU, Iran and Iraq.
·
The
total annual Sugar production worldwide is 172.5 MT.
·
Total annual sugar consumption worldwide is
171MT and the total sugar stock worldwide is 42.2 MT. (Year 2015)
ICE No.11 Sugar
contract VS ZCE Sugar futures contract
Product
|
Symbol
|
Contract Size
|
Quote
|
Tick Size
|
Contract Months
|
Trading Hours
London time
|
Minimum Trading Margin
|
ICE
Sugar #11
|
SB
|
12,000 pounds (5442kgs)
|
Cents/pound
|
0.01cent/lb
|
3,5,7,10
|
8:30am-6:00pm
(London time)
|
|
ZEC
White Sugar
|
SR
|
10
Tons
(10,000kgs)
|
CNY/Ton
|
1
CNY/Ton
|
1,3,5,7,9,11
|
Beijing
Time
UTC+8
9:00-11:30
a.m. 1:30-3:00 p.m.
|
6% of
contract value
|
ICE No.11 Sugar
option contract VS ZCE
Sugar futures options contract
Product
|
Symbol
|
Contract size
|
Quote
|
Tick Size
|
Contract
Months
|
Strike Price intervals
|
Last trading day
|
Trading hours
|
ICE
No.11 sugar options
|
SO
|
One futures contract
|
Cents
|
1/100 of a cent per pound
|
Regular Options: 1, 3, 5,7,10. Serial Options: 2,
4, 6,8,9,11,12, For the January regular option, the March contract is the
underlying future. For serial options, the underlying future is the next
Regular futures contract month.
|
Strike Price Increment will be $.25 cents at all
price levels
|
15th calendar day of the month that precedes the
options trading month, or the first business day after the 15th should this
day be a weekend or an Exchange holiday.
|
8:30am-6:00pm
(London time)
|
Product
|
Symbol
|
Contract Size
|
Quote
|
Tick Size
|
Contract Months
|
ZCE
White Sugar
options
|
SR +C/P + Strick
price
|
1hand of sugar
futures contract
|
CNY/Ton
|
0.5CNY/Ton
|
1,3,5,7,9,11
|
Expiration Months
|
Amount of Stick Prices
|
Strike Price Intervals
|
Last Trading Day
|
Trading Hours UTC+8
|
|
Two months before
futures contracts’ delivery months
|
5 out-of-money, 1 at-the-money and 5
in-the-money according to the price range of exercise price
|
futures price
< 3000RMB, Strike Price intervals is 50RMB/Ton;
3000RMB
futures
price>7000RMB, Strike Price intervals
is 200RMB.
|
Last trading day
of the options Expiration Months
|
9:00-11:30 a.m.
1:30-3:00 p.m.
|
Data
from ZCE showed in 2015, that the sugar trading volume almost doubled and more than
30% of the trades were physical hedging. According to the their survey, 90% of the big saw sugar producers, 80% of
big sugar trading companies, 60% of the large manufacture participated in sugar
futures trading hedge their risk.
Most
of China’s domestic sugar production is grown in the south of the country, mainly
in Guangxi province which produces roughly 70% of China’s domestic sugar production
and Yunnan province produces more than 15%.
Hua
Tai Chang Cheng Futures forecasts a 22% from 2015 to 2016 total sugar
consumption in China. The sugar consumption per Chinese is only 1/3 of the
world’s average level, as the Chinese economy continues to grow and the tastes
change in China we see a huge potential increase in Chinese domestic demand.
 |
| David Nealis and Bob Meara of Ceres Ltd at the Shanghai Futures Exchange |
We
look forward to trading the sugar options contract at China’s Zhengzhou
Commodities Exchange.
If you are interested in participating in Chinese financial markets, please contact: info@ceres888.com
