On October 23, the Shanghai Futures Exchange (SHFE) officially implemented its optimized business rule system, marking a significant step in the development of its regulatory framework. The new rule system features a structure that combines “management guidelines” with “product-specific rules.” The aim is to create a more scientific, stable, and user-friendly set of regulations that better serve the real economy and lay a solid foundation for exploring integrated foreign trade openness. An English version of the new rule system was also released on the SHFE’s website.
According to reports, the SHFE announced the optimized version of its rule system on August 23 and established a two-month transition period for stakeholders. This optimization process drew on advanced experiences from international exchanges such as the Chicago Mercantile Exchange, Intercontinental Exchange, and London Metal Exchange, incorporating feedback from various market participants, which has garnered broad support.
Key highlights from this optimization effort include:
1. **Restructuring and Simplification**: The general management guidelines have been split and restructured, with product-specific rules subsequently distilled and formulated. The existing 31 business rules have been streamlined to 20 management guidelines and 18 product-specific rules. General provisions covering trading, settlement, delivery, and risk management will remain in the broad management guidelines, while personalized parameters related to specific products will transition to the newly established product-specific rules. In the future, when launching new products or internationalizing existing ones, the SHFE can simply create or amend a single product-specific rule, enhancing the stability and compatibility of its regulatory framework.
2. **Reduction of Rule Volume**: The number of rules has been reduced to enhance the clarity and user-friendliness of the regulations. Eleven rules, which were highly specific to certain products—such as those concerning gold delivery, fuel oil delivery, and steel factory inventory—have been eliminated or adjusted into management guidelines or product-specific rules. As a result, the current second-tier business rules have decreased from 31 to 20, significantly facilitating participants’ access to relevant information.
3. **Legal Clarity and Consistency**: The nomenclature and descriptions of the rules have been refined to enhance legal clarity and ensure coherent integration. In accordance with the Futures and Derivatives Law of the People’s Republic of China, adjustments were made to the descriptions related to members, information management, designated depository banks, and futures contracts. Additionally, the names of all second-tier rules were standardized to “management guidelines,” further streamlining the logical relationship within the rule system.
At the level of product-specific rules, the 18 newly formulated guidelines are primarily derived from the distinct provisions in various product contracts and business rules. Market participants can refer to a single product-specific rule to understand all parameters related to trading, settlement, delivery, and risk management for that product.
A representative from the SHFE indicated that the next steps will involve various training and outreach efforts aimed at both domestic and international entities. These initiatives will help all market participants navigate and master the optimized rule system, ensuring a smooth implementation and contributing to the rapid development of a world-class exchange.
