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Adjustment of cotton yarn futures rules
!!Zu Li,Director of Agricultural product department,Zhengzhou Commodity Exchange

2019-06-13 16:05:24

The report is divided into three parts. 
1. Cotton yarn futures operation status 
The launch of cotton yarn futures fills the gap in long fiber textile products. Daily trading volume of cotton yarn futures approached 3,997 lots and the daily open interest reached 1,105 lots since launched. Market scale waits for enlargement, and the market basis requires enhancement. The correlation of futures and spot cotton yarn prices is 0.71 since launched and that of cotton and cotton yarn futures prices is at 0.83. Discovering the price function is basically effective, and the price fluctuation is relatively large. 

2. Revision plan for cotton yarn futures rules 
There are problems in cotton yarn futures rules like Differences between the quality indicator requirements of futures delivery and the actual situation of the spot market, unclear use of benchmark product for delivery, not beneficial for hedging; Tight capital of textile enterprises, higher registration cost of credit warehouse receipt, insufficient ability of delivery factory to participate in futures trading; Hard to fully meet the delivery requirements through whole factory delivery, coupled with narrow delivery scope. 

Therefore, ZCE improved the rules like optimizing the quality indicator system of cotton yarn futures and enhance the directivity of futures prices, expanding the scope of delivery and smooth delivery channels and adjusting position limit system and strictly control the risk of trading delivery. 

3. Cotton yarn futures development prospect 
Cotton yarn futures meeting the requirement for risk management of textile enterprises, providing yarn risk management tools for textile enterprises to lock the processing profit. Some enterprises have benefited from such participation. Meanwhile, cotton yarn futures change traditional trade condition. After ZCE introduced market maker, it tried to develop basis transaction, warehouse receipt auction, warehouse receipt financing and OTC option, gradually promoting internationalization of China's cotton yarn trading. 
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