FTZ Copper premium clearing business launched
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In the morning of February 6, the Shanghai Municipal Financial Service Office and the Shanghai Clearing House jointly held a conference for the launch of the Central Counterparty Clearing business for the Free-trade-zone Copper-premium Swap, which will be priced, cleared and settled in yuan. Ji Zhihong, head of the financial market department of the People’s Bank of China, and Zheng Yang, director of the Shanghai Municipal Financial Service Office, attended the conference and delivered speeches. Xu Zhen, chairman of Shanghai Clearing House, introduced the business.
The Free-trade-zone Copper-premium Swap uses Shanghai bonded cathode copper premium as the underlying asset. The transactions of the swap will be made by brokerage companies recognized by the Shanghai Clearing House and cleared by the house. It will adopt balance settlement based on the Yangshan Copper Premiums at a predetermined date in the future. The FTZ copper premium swap is the world’s first financial derivatives based on premium index. It provides a basic hedging toll for related enterprises to hedge against price volatility in bonded copper premium.
The launch of FTZ copper premium swap not only filled the blank of the China’s financial market but also catered to the need of the zone-based enterprises. It also takes advantages of the zone’s function to further promote the cross-border use of yuan and boost Chinese enterprises’ pricing power in international copper trading. Meanwhile, it utilizes the zone’s advantage in warehousing, drives the construction of spot trading platforms for commodities and brings together related goods flows and capital flows, which is significant for Shanghai to build international economic, financial, trade and shipping centers.
Zheng of Shanghai Municipal Financial Service Office said Shanghai will continue to improve support and service to financial innovations in order to boost the role of financial market and enhance innovative impetus and vitality of financial market. The city will also integrate the construction of Shanghai free trade zone with the building of an international financial hub, Zheng said.
The details of the first FTZ copper premium swap transaction were also disclosed at the conference. The first batch of 4,400 FCPM032015 contracts was traded, involving 22,000 tons of copper worth 12.47 million yuan (US$2 million). Hundreds of representatives for the People’s Bank of China, Shanghai Municipal Government, financial institutions, brokerage companies and enterprises attended the conference.