By Lewis Jackson
BEIJING (Reuters) -The Shanghai Futures Exchange (ShFE) released draft proposals on Tuesday to further open up domestic futures to overseas investors and brokers as part of an effort to help internationalise the renminbi.
China is the world’s largest consumer of industrial metals by far, but much of the trade is priced by overseas benchmarks. ShFE has long been working on plans to build its global presence and challenge the dominance of the rival London Metal Exchange (LME).
The 34 different proposals, which stretch from options trading and hedging to tin futures, aim to “fully introduce overseas participants” and help internationalise the renminbi, the exchange said.
“This announcement is basically a constitutional change for the entire ShFE opening up,” said Tiger Shi, CEO of broker BANDS Financial. “Access for foreign investors to all the ShFE products is on a fast track from now on.”
The changes under consideration include allowing foreign brokers and other traders directly onto the exchange, instead of through an onshore intermediary, as is the case today.
Participants would also be allowed to post margins in foreign currencies such as the U.S. dollar.
Draft rule changes covering futures for 18 products including alumina, nickel and copper cathodes, are available for public comment until June 4.
“We are excited by the opportunities it presents particularly given the importance of spreads and particularly arb (arbitrage), which has garnered greater exposure amid the threat of tariffs and particularly between CME and LME copper,” said Alastair Munro, senior metals strategist at Marex.
London-headquartered Marex is one of eight financial firms allowed to trade on the LME’s open-outcry floor.
“That presents opportunities particularly on the likes of nickel where those price differentials at points present trading opportunities,” Munro added.
Reuters reported last week that ShFE was considering opening its domestic nickel futures contract to foreign investors this year, instead of launching a separate contract on its International Energy Exchange.
The LME is the world’s biggest marketplace for industrial metals and dominates global nickel trading, but market confidence was shaken in 2022.
In March that year, the nickel price rocketed to a record above $100,000 a metric ton and the LME cancelled nickel trades on March 8, for which it was sued by hedge fund Elliott Associates.
The LME did not immediately respond to a request for comment.
(Reporting by Lewis Jackson; Addtitional reporting by Eric Onstad in London; Editing by Mark Heinrich and David Holmes)
