1、Analysis on Futures in China- - the Problems and its Developing Trend1Futures, from the meaning of the word itself and compared with the actuals, must be something relative to the future. It is a term here used to designate all contracts covering the sale of financial instruments or physical commodi
2、ties for future delivery on a commodity exchange.In the thirties and the forties of the nineteenth century, Chicago became the center of the cargo of the grain, for its significant hug geographic location and agricultural appealing climates. Because of the definite harvesting season of the grain, in
3、efficient warehouses and the inconvenient transportation, the grains price fluctuated according to the demand and the season. As a result, grain transaction turned to be highly risky. In order to ensure their future interest, the grain mediators signed the sale contracts with the manufacturers and t
4、he grain salesmen, which stipulated the future dealing in the spring of the next year, immediately after their purchase of the grain, thus the forward contract (A cash market transaction in which delivery of the commodity is deferred until after the contract has been made. It is not standardized and
5、 is not traded on organized exchange) came into being.In the following ten and even more years, a list of shortcomings hackled forward contract trading from future developing. First, there are no standardized rules for the quality and delivery time of the exchange commodities in the forward contract
6、 trading. Whats more, the forward contracts themselves are difficult to exchange. It seemed to be no other choices other than performance at the mean time. This feature was hardly able to suit the flexible situation of the market. Then, whether one forward contract would be carried out on time or no
7、t, completely depends on the traders confidence over his partner. The usual situation turned out to be of high cost and thorough investigation, which led to high risk in the performance of the contract. In order to cope with all these problems, CNE (Chicago Mercantile Exchange) formed the General Ru
8、les in 1865, to standardize the forward contract and allow which to exchange freely then the futures contracts (A standardized, transferable legal agreement to make or take delivery of a specified amount of a certain commodity of a certain grade or type at a specified amount of a certain commodity o
9、f a certain grade or type at a specified point in the future. I Features of Futures TradingBefore the conduction of the features of futures trading, we can compare it with other firms of trading to have a much clearer conception.First, compared with the spot trading, the biggest difference between t
10、hem is the time span between the assignment contract and the delivery of goods.Second, there are still large differences with the stock market trading. The amount of certain type of stocks is pre-determined before the real entry into the stock market, by the issuing company; at the same time, the st
11、ocks itself has already existed on the stock exchange. On the other hand, on the futures market, no futures contracts exist before trading, and a futures contract will be generated so easily only when a solar contract a buyer.1. The Subject Matter In the futures market, are the standard contracts. T
12、his kind of standard contracts is easy to Analysis on Futures in China- - the Problems and its Developing Trend2be exchanged, accordingly, there are less inconvenience in futures trading avoid the transaction of the actuals.Second, all the futures trading are dealt together in the bourse. On the oth
13、er hand, the majority of forward trading is made privately, by the means of telephone, telegraph, fax or e-mail.Third, if you want to do futures trading, the only thing needed to be done beforehand is to deposit a certain sum of money in your account, this is what we call guaranty money. In general,
14、 the guaranty money is five to eighteen percent of the contract value, most of the time under ten percent, then you can buy the goods, whose value is ten times of the guaranty money. Here comes one important feature of the futures trading, that is, using a small slice of money to do much bigger busi
15、ness.Last, when you do final settlement for your trading, the only place you can go is the specific clearing house. They are in charge of the clearing, and the arrangement of the delivery and reception of the goods; while, nearly all the forward trading are settled by the two dealing parties themsel
16、ves, so do the delivery and reception of the goods2. The History and Present Situation of the Futures TradingAfter the modernized futures trading came into being at Chicago in the middle of the nineteenth century, this kind of dealing method together with its General Rules were copied by other bours
17、es in the next a few years.Since they are in charge of the clearing, and the arrangement of the delivery and reception of the goods; while, nearly all the forward trading.2.1 Brief Introduction to the Worlds Futures Trading HistoryBy the beginning of twentieth centuries, the futures trading business
18、 has already had a quite large scope and depth in a list of countries, such as U.S.A., U.K., Japan and so on. However, in the coming several decades, the steps of the enlargement for both futures trading and futures market turned to be rather slow and stagnant. No newly-come trading varieties, no re
19、search and articles related, therefore, before nineteen sixty-seven, nearly all attention was paid to the futures trading. Things changed dramatically in the seventies, in the global economic field, the fixed rate was taken place by the flexible exchange rate. Many financial control policies, such a
20、s the contract on the interest, were banned. As a result, the exchange rate and the interest rate fluctuated greatly, this phenomenon reminded people to focus again on the corner of the market, and evaluate its potential value again. People found that the futures are the best acute weapon for coping
21、 with all the price fluctuation, including the price of futures trading emerged at an amazing speed, and it came to the claim in the eighteen fifties. For the impact of the “Black Monday” in October nineteen eighty-seven, futures business in nearly all the countries were tremendously shocked especia
22、lly did the financial futures trading. Consequently, the proceeding speed decline a little, while, futures business gained more welcoming in many countries in the world with time passed by, and a lot of countries in the world with time passed by, and a lot of countries are contributing to form new s
23、et of trading or create new types of futures contract.Analysis on Futures in China- - the Problems and its Developing Trend32.1.1 In the U.S. The U.S.A. has the most flourishing futures trade. Chicago is the futures trading center not only of the U.S.A. but of the whole world. It is exact the place
24、that, the bourse with large number volume and largest history. Chicago Board of Trade (CBT), where the T-Bond futures contract gained the greatest success. Besides the CBT, other famous bourses in the U.S.A. are, for example, Chicago Mercantile Exchange (CME), which has the most various types of con
25、tract in the world, the Mid-America Commodity Exchange, which obtained great reputation for its Mini-contract and also the Commodity Exchange (COMEX) which occupy a fairly large slice of the whole gold futures trading.2.1.2 In EuropeIn England, there is a long futures trading history. London Mental
26、Exchange (LME) opened in the mid-nineteenth century. At the same time, financial futures trading started at nineteen eighty-two, ten years later than the U.S London International Financial Future Exchange (LIFFE) is known as the biggest financial futures market outside the U.S In the year nineteen e
27、ighty-seven, LIFFE made an agreement with CME, in which they agree to establish the mutual offset clearing settlement. Then LIFFE established the same system with Sydney Future Exchange (SFE).2.1.3 Asia-Pacific RegionSingapore International Monetary Exchange (SIMEX) started its first deal at ninetee
28、n seventies. It is the first one in the developing countries and regions and, to some degree, it is also the most internationalized bourse. In Japan, Tokyo Stock Exchange (TSE) was opened in October 1985. In the year 1980, TSE the trading amount and the open contract amount came to the top of the wo
29、rld.3. The Features of World Futures TradingAfter analyzing the sprout of global futures trading, we can have a brief view of the world futures market from the next five points.First, the U.S., the U.K., and Japan this three strong countries constitute three hugs of the global futures trading. This
30、conclusion was made for the reasons listed below. First, in these three countries the commodity futures trading began at a very early age and all have a fairly large scale now. Second, they are all international financial centers, with their strong economic back-ground, their financial futures have
31、their unique potential for future enlargement, which cant hardly be copied or paralleled by others.Secondly, financial futures flourish at a tremendous speed, and it shows the tendency to replace others in the coming future. In the international financial central areas such as the U.S.A., U.K., and
32、Japan, new dealing emerging at nearly every minute, simultaneously, the original business enlarged its scope without even a minute stop. Countries, which have no financial Analysis on Futures in China- - the Problems and its Developing Trend4futures, keenly hope to invest in this field. Consequently
33、, the previous structure of the futures market altered fundamentally. Financial futures, a newly-come member, has already became the main part in the futures trading. It only occupied three percent in 1977; till mid-eighties, it has already invested to more than sixty percent of the whole business.T
34、hirdly, severe competition inside the business. The competition in the macro-scope, is between Chicago and N.Y. in America; is among Tokyo, Singapore and Hongkong in Asia-Pacific region; and in Europe, the U.K., France, German, Sweden, Norway and Holland all take their parts in the competition. In t
35、he micro-scope, every bourse is fighting aggressively for more slice of the pie. At present, the competition on the financial futures is fiercer than the commodity futures in nearly all countries, and the competition on the latter is focus on only a few types of contracts, for instance, the gold or
36、petroleum. Finally, the globalization of the future business. Many boards of trade listed trade the type of futures contract which use the foreign financial tools as the subject matter. One perfect example is the mutual offset agreement among bourses.II Chinas Futures MarketDuring the development of
37、 the Chinas futures market, there came three large ones that share a big slice of the market.1. Brief Introduction to Chinas Futures MarketThe development. Our economic restriction started from the rural region in the year 1980. Together with its further proceeding, there came lots of difficulties a
38、nd barriers. First, the price of the agricultural products fluctuated intensely which hurt the interest of the peasant badly. Whats more, the production of agricultural products fluctuated simultaneously, the grain harvest, after coming to the peak with four hundred billion kilograms, declined for c
39、ontinuing four years till the year 1988. Many agricultural products were hard to buy and the same thing happened during the sale process. This phenomenon caused the transaction difficult to run smoothly. Furthermore, all this problems loaded heavy burden on our domestic economy. The government had t
40、o allocate a large sum of money from the tight budget to subsidize the price of agricultural products. After thorough consideration of all the pros and cons of the past experience, some experts proposed to establish agricultural financial futures trading to tackle with the potential risk. From then
41、on, we can split the developing time into two period.The beginning period started from1988 to 1992. After vast discussion among experts and researching scientist for the necessity and feasibility of the agricultural financial futures market and trading system, the government pinned great attention a
42、nd focus. In annual governmental work report, our government clearly claimed to explore our own futures market. Then after carefully chosen seven test cities, in the year 1988, Henan province carried out the test plan and forward the first board of trade, which chose the wheat to be the subject matt
43、er.The developing period started from 1991 till now. After the parole of the DengXiaoping in Shenzhen, our futures business flourished accordingly. During this period, our futures trading showed several unique features.Analysis on Futures in China- - the Problems and its Developing Trend5First, the
44、subject matter of trading altered from specifically agricultural by-products to other block means of production. Numerous of the bourse have been preparing or have already opened.Second, during the development of the Chinas futures market, there came three large ones that share a big slice of the ma
45、rket. Zhenzhou, famous for its agricultural commodity futures trading; Shenzhen, a highly developed one; especially Shanghai Futures Exchange (SHFE), which is sitting on the Shanghai Futures Tower in Pudong New Area. SHFE is established after reorganizing and merging of Shanghai Metal Exchange, Shan
46、ghai Commodity Exchange and Shanghai Cereals try the best to take advantage of the role of futures market.Developing the grain futures market is an effective way to divert the risk of grain production and help farmers to improve their crops. Grain production in China is an industry with high risk, w
47、hich are usually shared by the government and grain enterprises. Futures markets not only divert the risks from farmers and enterprises to the grain speculation of the risk by adjusting price. The futures market sets medium or long-term grain prices and can help farmers grow grain and maintain the m
48、arket. Without default and fake goods, the futures market in China is considered as the safest circumstance. Such a market is more mature in the developed countries. In the United States, the futures secure 90 percent of the countrys grain production from risk. The Chicago Board of Trade is the larg
49、est and oldest futures exchange on grain produces. All in all, we should put our priority on strengthening and further enhancing the present position of the agricultural commodity futures trading, and always bear in mind that it is a continuing and sustainable strategy. 1Second, highlighting the role played by the control organizations including, the China Security Regulatory Commission (CSRC) and the China Futures Association (CFA).2Futures varieties: China will promote more types of futures this year to enrich its futures market, the director of futures market, the C
