May 20, 2020 / 4:02 AM / 10 days ago

Shanghai Futures Exchange to recruit market makers to boost liquidity

BEIJING/SHANGHAI (Reuters) - China’s Shanghai Futures Exchange seeks to recruit market makers for five listed futures products, including the flagship steel rebar and hot-rolled coils, saying it aims to “resolve discontinuity issues of main contracts fundamentally”.

FILE PHOTO - A company logo of Shanghai Futures Exchange is displayed at a booth during LME Week Asia in Hong Kong, China June 14, 2016. REUTERS/Bobby Yip

There are three contracts mostly traded per year on the exchange, while others are not that active. The bourse hopes the scheme would help boost liquidity for the not-so-active contracts and prices could better reflect market fundamentals with enough trading volumes.

A market maker is a qualified individual market participant or institution that can buy and sell on a regular and continued basis at a publicly quoted price.

The bourse said in a statement late on Tuesday that applicants should have net assets of no lower than 50 million yuan ($7.04 million), no major violation of regulations in recent three years, and “stable, reliable” market-making technology system, among other requirements.

The most-traded steel rebar and hot-rolled coils contracts are typically delivered in January, May and October.

The total market volume of the most active rebar contract hit a near two-year high of 4.62 million lots on March 19, before declining to 1.74 million lots on Tuesday, while the trading volume of hot-rolled coil was at 258,269 lots.

The exchange also seeks market makers for its bitumen, natural rubber and wood pulp contracts, according to its statement.

“The exchange may want to make those not so actively traded contracts more active and facilitate hedge by spot goods holders,” said Zhuo Guiqiu, an analyst with Jinrui Futures.

“Market makers can help with liquidity to some extent, but it needs mills and traders’ participations.”

($1 = 7.0980 yuan)

Reporting by Min Zhang in Beijing and Emily Chow in Shanghai; Editing by Subhranshu Sahu

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