Zhengzhou Commodity Exchange (ZCE) is one of the most influential futures exchanges in China and the first of its kind in the country. Founded in 1978, the Zhengzhou Commodity Exchange was the first futures exchange to introduce commodities trading to China. Its establishment marked an important first step in the process of commercializing the Chinese economy.
In its earliest days, the ZCE specialized in agricultural products such as cotton and sugar, although it has since expanded to trade futures on a wide range of commodities, including base metals, energy products, agricultural products, and plastics. The Zhengzhou Commodity Exchange is situated in the Henan Province of Central China and operates as a standalone market within its own premises; it is not affiliated with any other international exchanges.
The Zhengzhou Commodity Exchange is a prolific and dynamic exchange. By the end of May 2016, the ZCE’s total market capitalization ranked second in the world at 26.2 trillion RMB (4.124 trillion USD). In April, it traded more than 6 trillion USD worth of futures contracts, with more than 24.2 billion contracts traded in the month alone. The exchange also boasts a wide variety of different trading and investment products - currently it offers futures, option and physical commodities trading as well as trading in commodities ETFs.
In order to encourage efficient and open trading platforms, the ZCE has created the Inter-Commodity Margin Offset Scheme, which was first tested in 2016 and fully launched in early 2017. This scheme permits margin offsetting between different commodities. For example, positions held in zinc can be offset by positions in copper and the mutual offset of margin can be used to reduce the margins required overall.
The Zhengzhou Commodity Exchange is continuously innovating and developing new products, with the launch of the T+1 delivery contract in November 2016 being a key step in this process. The contract assists in providing liquidity and managing price risk. In addition to these forward-thinking developments, the exchange is also involved in a number of areas designed to attract new international business. Key among these is low-cost access to the Chinese market.
The Zhengzhou Commodity Exchange undertakes a number of activities to promote commodities trading and keep it within the rules and regulations set out by the Chinese government. It provides education and training services, invests in research and development, works closely with other futures exchanges, and develops and typically approves new products.
The ZCE strives for greater transparency, technological innovation and efficient practices in the area of commodities trading. As such, numerous technological and trading tools have been developed and made available to participants, such as improved trading terminals, online trading of capital markets and futures, the Goods Delivery Monitoring System, and the Accounts and Funds Management System.
Finally, another unique feature of the Zhengzhou Commodity Exchange is its ability to pool investors’ funds, allowing them to purchase various products to spread risk or diversify a portfolio. This forward-thinking and innovative approach to markets and commodities trading have seen the Zhengzhou Commodity Exchange become one of the leading players in the sector, both in China and across the world.
