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China's ShFE aims to open non-ferrous futures to foreign investors within two years

The Shanghai Futures Exchange (ShFE) is exploring ways to open up its non-ferrous metals futures contracts to foreign investors and has a rough timeline to give access within two years, its chairman said on Tuesday.

China has so far opened up three commodities futures contracts to foreign investors – crude oil on the Shanghai International Energy Exchange, iron ore on the Dalian Commodity Exchange and plastics raw material purified terephthalic acid (PTA) on the Zhengzhou Commodity Exchange.

But international investors are still waiting for access to non-ferrous metals derivatives in China, the world’s biggest metals consumer. Copper, aluminum, nickel, zinc, lead and tin are all traded on the ShFE but international investors need to have registered a local entity in China in order to trade.

“The timeline for launching internationalized non-ferrous (futures) contracts is not yet set,” ShFE chairman Jiang Yan told Reuters on the sidelines of the Shanghai Derivatives Market Forum, but added that the exchange was aiming to give foreign investors access “within two years as a rough timeline”.

Opening up ShFE’s non-ferrous markets would be an exciting development for traders and help China’s ambitions of developing benchmark contracts, said Jeremy Goldwyn, Managing Director at commodities broker BANDS Financial Ltd.

“Non-ferrous metals are clearly an extremely significant sector where China represents a major proportion of global trade and production”, Goldwyn said.

“Base metals also represent a key focus for Beijing of attempting to make China a benchmark.”

In a conference presentation, Jiang said ShFE would initially use the TSR 20 technically specified standard rubber contract to attract more foreign investors.

TSR 20 would be the second Shanghai commodities futures to be opened to international investors after crude oil, he said.

The exchange was also preparing to launch stainless steel and alumina futures, and gold options contracts this year.

“We will push ahead with studies for natural gas and petroleum gas futures products,” Jiang added, without specifying timelines.

Jiang also said the exchange planned to collaborate with foreign futures exchanges, but did not elaborate.

China is planning to give foreign investors more access to its futures market and will accelerate the launch of TSR 20 rubber, rice and fertilizer futures, a China Securities Regulator Commission (CSRC) official earlier told the same forum.