Regulator Gives Go Ahead for China's First Agricultural Options

China's securities regulator said on Friday, 16 December, it had approved the launch of options contracts for white sugar and soymeal, which will be the first agricultural derivatives products in the world's biggest commodity market.

The China Securities Regulatory Commission ("CSRC") said in a statement it had given the go ahead for the Dalian Commodity Exchange to list soymeal options and for the Zhengzhou Commodity Exchange to have white sugar options.

Options give the holder the right to buy or sell a commodity at a particular strike price and are widely used in Europe and the United States by investors across commodities. Users range from commercial hedgers such as farmers and oil drillers to institutional and speculative investors.

No launch dates were given, but the watchdog said preparation work would take about three months.

"The sugar option will help sugar producers and dealers better hedge risks ... as it does not require market participants to top up margins when futures prices move in unfavourable directions," said Zhengzhou Commodity Exchange in a statement.

The relatively lower-cost options will also lure retail investors to take part in futures trading indirectly.

Both exchanges posted draft specifications of the contracts, including proposed lot sizes of 10 tonnes, and said they were seeking feedback from the industry.

For sugar, the expiry months will be January, March, May, July, September and November.

Dalian already has oil and oilseed futures, including soybean, soybean meal, soybean oil and palm oil, and these account for just under half of the trading volume in China's agricultural futures.


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