Risk Management
Risk Management Regimes
To strengthen risk management in futures and options trading, safeguard the legitimate rights and interests of market participants, and ensure the smooth conduct of futures and options trading activities on SHFE, SHFE adopts margin requirement, price limit, position limit, trading limit, large trader position reporting, forced position liquidation, and risk warning, among other measures.
Margin Requirement
Overview
SHFE applies different rates of trading margin for a futures contract across different time periods in its lifecycle (i.e., from the listing day to the last trading day). For how these time periods are defined, please refer to the Risk Management Rules of the Shanghai Futures Exchange . The table below shows the time-based margin rates for each futures contract over its lifecycle, in accordance with respective futures rules.
|
Product |
Time-based Margin Rate |
|||
|
From the date of listing |
From the first trading day of the month before the delivery month |
From the first trading day of the delivery month |
From the second trading day before the last trading day |
|
|
Copper |
5% |
10% |
15% |
20% |
|
Aluminum |
5% |
10% |
15% |
20% |
|
Zinc |
5% |
10% |
15% |
20% |
|
Lead |
5% |
10% |
15% |
20% |
|
Nickel |
5% |
10% |
15% |
20% |
|
Tin |
5% |
10% |
15% |
20% |
|
Aluminum oxide |
5% |
10% |
15% |
20% |
|
Cast aluminum alloy |
5% |
10% |
15% |
20% |
|
Gold |
4% |
10% |
15% |
20% |
|
Silver |
4% |
10% |
15% |
20% |
|
Steel rebar |
5% |
10% |
15% |
20% |
|
Hot-rolled coil |
4% |
10% |
15% |
20% |
|
Wire rod |
7% |
10% |
15% |
20% |
|
Stainless steel |
5% |
10% |
15% |
20% |
|
Bitumen |
4% |
10% |
15% |
20% |
|
Butadiene rubber |
7% |
10% |
15% |
20% |
|
Natural rubber |
5% |
10% |
15% |
20% |
|
Woodpulp |
4% |
10% |
15% |
20% |
|
Offset paper |
5% |
10% |
15% |
20% |
|
Fuel oil |
8% |
From the 10th trading day of the second month before the delivery month |
From the 10th trading day of the month before the delivery month |
From the second trading day before the last trading day |
|
10% |
15% |
20% |
||
Frequently asked questions
Rules
If the Risk Management Rules of the Shanghai Futures Exchange provide for more than one trading margin rate for the same contract, the highest one is in effect. For detailed rules on margin requirement, please refer to the Risk Management Rules of the Shanghai Futures Exchange, the Options Trading Rules of the Shanghai Futures Exchange and other applicable SHFE rules.
Price Limit
Overview
"Price limit" is the maximum price movement, up or down, that is permitted for a contract within a single trading day. During trading of the contract, SHFE will, in view of the level of market risk, adjust the price limit of the contract if:
1. the contract experiences a "same-direction limit-locked market";
2. there is a long public holiday;
3. market risk has changed notably in SHFE's opinion;
4. it is otherwise warranted in SHFE's opinion.
If the Risk Management Rules of the Shanghai Futures Exchange provide for more than one price limit for the same contract, the highest one is in effect.
Frequently asked questions
Rules
For detailed rules on price limit, please refer to the Risk Management Rules of the Shanghai Futures Exchange, the Options Trading Rules of the Shanghai Futures Exchange and other applicable SHFE rules.
Position Limit
Overview
"Position limit" means the maximum size of long or short general positions a Member, OSP, Overseas Intermediary, or Client may hold in a futures contract as prescribed by SHFE. A Non-FF Member, OSNBP, or Client may increase its position limit by applying for an arbitrage position quota. Hedging position quota is also available upon approval and not bound by the usual position limit. Position limit varies based on the specific circumstances of each futures product and over the product’s lifecycle. In particular, a tighter limit will be in effect in the delivery month. The tables below show the relative (i.e., percentage-based) and absolute (i.e., fixed-amount) position limits for each futures contract over its lifecycle, in accordance with respective futures rules.
|
From listing to the last trading day of the second month before the delivery month |
Month before the delivery month |
Delivery month |
|||||
|
Open interest |
Percentage-based position limit (%) and fixed-amount position limit (lots) |
Fixed-amount position limit (lots) |
Fixed-amount position limit (lots) |
||||
|
Non-FF Member |
Client |
Non-FF Member |
Client |
Non-FF Member |
Client |
||
|
Copper |
≥ 80,000 |
10% |
10% |
3,000 |
3,000 |
1,000 |
1,000 |
|
< 80,000 |
8,000 |
8,000 |
|||||
|
Aluminum |
≥ 100,000 |
10% |
10% |
3,000 |
3,000 |
1,000 |
1,000 |
|
< 100,000 |
10,000 |
10,000 |
|||||
|
Zinc |
≥ 60,000 |
10% |
10% |
2,400 |
2,400 |
800 |
800 |
|
< 60,000 |
6,000 |
6,000 |
|||||
|
Lead |
≥ 50,000 |
10% |
10% |
1,800 |
1,800 |
600 |
600 |
|
< 50,000 |
5,000 |
5,000 |
|||||
|
Tin |
≥ 15,000 |
10% |
10% |
600 |
600 |
200 |
200 |
|
< 15,000 |
1,500 |
1,500 |
|||||
|
Cast aluminum alloy |
≥ 9,000 |
10% |
10% |
300 |
300 |
90 |
90 |
|
< 9,000 |
900 |
900 |
|||||
|
Steel rebar |
≥ 900,000 |
10% |
10% |
4,500 |
4,500 |
900 |
900 |
|
< 900,000 |
90,000 |
90,000 |
|||||
|
Wire rod |
≥ 225,000 |
10% |
10% |
1,800 |
1,800 |
360 |
360 |
|
< 225,000 |
22,500 |
22,500 |
|||||
|
Hot-rolled coil |
≥ 1,200,000 |
10% |
10% |
9,000 |
9,000 |
1,800 |
1,800 |
|
< 1,200,000 |
120,000 |
12,000 |
|||||
|
Stainless steel |
≥ 70,000 |
10% |
10% |
1,800 |
1,800 |
360 |
360 |
|
< 70,000 |
7,000 |
7,000 |
|||||
|
Butadiene rubber |
≥ 10,000 |
10% |
10% |
300 |
300 |
60 |
60 |
|
< 10,000 |
1,000 |
1,000 |
|||||
|
Offset paper |
≥ 25,000 |
10% |
10% |
500 |
500 |
100 |
100 |
|
< 25,000 |
2,500 |
2,500 |
|||||
Note: Open interest and fixed-amount position limit are on a single-counted basis (long or short)
|
|
From listing to the last trading day of the second month before the delivery month |
Month before the delivery month |
Delivery month |
||||
|
Open interest |
Percentage-based position limit (%) and fixed-amount position limit (lots) |
Fixed-amount position limit (lots) |
Fixed-amount position limit (lots) |
||||
|
Non-FF Member, OSNBP |
Client |
Non-FF Member, OSNBP |
Client |
Non-FF Member, OSNBP |
Client |
||
|
Nickel |
≥ 60,000 |
10% |
10% |
1,800 |
1,800 |
600 |
600 |
|
< 60,000 |
6,000 |
6,000 |
|||||
Note: Open interest and fixed-amount position limit are on a single-counted basis (long or short)
|
From listing to the last trading day of the third month before the delivery month |
Second month before the delivery month |
Month before the delivery month |
||||
|
Fixed-amount position limit (lots) |
Fixed-amount position limit (lots) |
Fixed-amount position limit (lots) |
||||
|
Non-FF Member |
Client |
Non-FF Member |
Client |
Non-FF Member |
Client |
|
|
Fuel oil |
7,500 |
7,500 |
1,500 |
1,500 |
500 |
500 |
Note: Open interest and fixed-amount position limit are on a single-counted basis (long or short)
|
From listing to the last trading day of second month before the delivery month |
Month before the delivery month |
Delivery month |
||||
|
Fixed-amount position limit (lots) |
Fixed-amount position limit (lots) |
Fixed-amount position limit (lots) |
||||
|
Non-FF Member |
Client |
Non-FF Member |
Client |
Non-FF Member |
Client |
|
|
Aluminum oxide |
8000 |
8000 |
900 |
900 |
300 |
300 |
|
Natural rubber |
1000 |
1000 |
300 |
300 |
50 |
50 |
|
Bitumen |
8,000 |
8,000 |
1,500 |
1,500 |
500 |
500 |
|
Gold |
18,000 |
9,000 |
5,400 |
2,700 |
1,800 |
900 |
|
Silver |
18,000 |
9,000 |
5,400 |
2,700 |
1,800 |
900 |
|
Woodpulp |
4,500 |
4,500 |
900 |
900 |
300 |
300 |
Note: Open interest and fixed-amount position limit are on a single-counted basis (long or short)
Frequently asked questions
What are the position limit rules for option contracts?
The tables below show the relative (i.e., percentage-based) and absolute (i.e., fixed-amount) position limits for each option contract over its lifecycle:
|
|
From listing to the second month before the delivery month of the underlying futures |
From the month before the delivery month of the underlying futures contract |
||
|
Fixed-amount position limit (lots) |
Fixed-amount position limit (lots) |
|||
|
Non-FF Member |
Client |
Non-FF Member |
Client |
|
|
Copper |
8,000 |
8,000 |
3,000 |
3,000 |
|
Aluminum |
10,000 |
10,000 |
3,000 |
3,000 |
|
Zinc |
6,000 |
6,000 |
2,400 |
2,400 |
|
Lead |
5,000 |
5,000 |
1,800 |
1,800 |
|
Tin |
1,500 |
1,500 |
600 |
600 |
|
Aluminum oxide |
8,000 |
8,000 |
900 |
900 |
|
Cast aluminum alloy |
900 |
900 |
300 |
300 |
|
Gold |
18,000 |
9,000 |
5,400 |
2,700 |
|
Silver |
18,000 |
9,000 |
5,400 |
2,700 |
|
Steel rebar |
90,000 |
90,000 |
4,500 |
4,500 |
|
Natural rubber |
500 |
500 |
150 |
150 |
|
Butadiene rubber |
1,000 |
1,000 |
300 |
300 |
|
Bitumen |
8,000 |
8,000 |
1,500 |
1,500 |
|
Pulp |
4,500 |
4,500 |
900 |
900 |
|
Offset paper |
2,500 |
2,500 |
500 |
500 |
Note: Open interest and fixed-amount position limit are on a single-counted basis (long or short)
|
|
From listing to the second month before the delivery month of the underlying futures |
From the month before the delivery month of the underlying futures contract |
||
|
Fixed-amount position limit (lots) |
Fixed-amount position limit (lots) |
|||
|
Non-FF Member, OSNBP |
Client |
Non-FF Member, OSNBP |
Client |
|
|
Nickel |
6,000 |
6,000 |
1,800 |
1,800 |
Note: Open interest and fixed-amount position limit are on a single-counted basis (long or short)
|
|
From the date of listing to the third month before the delivery month of the underlying futures |
From the second month before the delivery month of the underlying futures contract |
From the month before the delivery month of the underlying futures contract |
||||
|
Fixed-amount position limit (lots) |
Fixed-amount position limit (lots) |
Fixed-amount position limit (lots) |
Fixed-amount position limit (lots) |
||||
|
Non-FF Member |
Client |
Non-FF Member |
Client |
Non-FF Member |
Client |
||
|
Fuel oil |
7,500 |
7,500 |
1,500 |
1,500 |
500 |
500 |
|
Note: Open interest and fixed-amount position limit are on a single-counted basis (long or short)
What are the rules for open positions of futures contracts in a delivery month?
Minimum Order and Position Size for Each Futures Contract in their Delivery Month
|
|
Number of lots corresponding to the delivery unit |
|
Copper |
5 |
|
Aluminum |
5 |
|
Zinc |
5 |
|
Lead |
5 |
|
Nickel |
6 |
|
Tin |
2 |
|
Aluminum oxide |
15 |
|
Cast aluminum alloy |
3 |
|
Gold |
3 |
|
Silver |
2 |
|
Steel rebar |
30 |
|
Wire rod |
30 |
|
Hot-rolled coil |
30 |
|
Stainless steel |
12 |
|
Fuel oil |
1 |
|
Bitumen |
1 |
|
Butadiene rubber |
2 |
|
Natural rubber |
1 |
|
Woodpulp |
2 |
|
Offset paper |
1 |
How will SHFE handle exceedance of position limit by Clients?
If a Non-FF Member or OSNBP exceeds the position limit, SHFE may exercise forced position liquidation according to the applicable rules. The open positions held in aggregate by a Client through multiple trading codes opened with different FF Members, OSBPs, or Overseas Intermediaries should not exceed the position limit set by SHFE for Clients. If the position limit is exceeded, SHFE may instruct the FF Members or OSBPs to liquidate the excess.
Rules
For detailed rules on the position limit, please refer to the Risk Management Rules of the Shanghai Futures Exchange, the Options Trading Rules of the Shanghai Futures Exchange and other applicable SHFE rules.
Trading Limit
Overview
SHFE implements a trading limit. Trading limit is the maximum size of positions that can be opened by some or all of the Members, some or all of the OSPs, and some or all of the Clients in a contract within a certain period. SHFE may, based on market conditions, set the maximum size of positions opened in a single day in different listed products and contracts for some or all of the Members, some or all of the OSPs, and some or all of the Clients, with the specific threshold to be separately announced by SHFE. The maximum size of positions opened under accounts involving actual control relationship in a single day is counted on an aggregate basis and applies to this group of accounts as a whole.
Rules
For detailed rules on the trading limit for futures and options, please refer to the Risk Management Rules of the Shanghai Futures Exchange and other applicable SHFE rules.
Large Trader Position Reporting
Refer to the guidelines for large trader position reporting.
Forced Position Liquidation
Overview
"Forced position liquidation" means the compulsory liquidation of positions carried out by SHFE against a Member, OSP, Overseas Intermediary, or Client who violates relevant SHFE rules. The liquidation price is determined by the market. If liquidation cannot be completed within the specified timeframe due to the limit price or as the result of other market conditions, the remaining positions will be closed out on the following trading day. Losses arising from forced position liquidation are borne by the person directly responsible. If liquidation cannot be completed, the position holder remains liable for the positions concerned and any associated delivery obligations.
Frequently asked questions
1. Under what circumstances will SHFE force-liquidate futures positions?
SHFE will carry out forced position liquidation if:
(1) the clearing deposit balance of a Member recorded on any internal ledger at SHFE, whether for its own account or for one it provides clearing services to, falls below zero and it fails to meet the margin requirement within the specified time limit;
(2) the open positions of a Non-FF Member, OSNBP, or Client exceed the size of the applicable position limit;
(3) a Member or Client fails to bring its positions in a futures contract to the required multiples within the specified time limit;
(4) any violation of applicable SHFE rules that warrants a forced position liquidation;
(5) any emergency occurs that warrants a forced position liquidation;
(6) there arises any other circumstance that warrants a forced position liquidation.
2. Under what circumstances will SHFE force-liquidate option positions?
SHFE will carry out forced position liquidation if:
(1) the clearing deposit balance of a Member recorded on any internal ledger at SHFE falls below zero and the Member fails to meet the margin requirement within the specified time limit;
(2) the open positions of a Non-FF Member, OSNBP, or Client exceed the size of the applicable position limit;
(3) any violation of applicable SHFE rules that warrants a forced position liquidation;
(4) any emergency occurs that warrants a forced position liquidation;
(5) there arises any other circumstance that warrants a forced position liquidation.
3. What are the principles to execute forced position liquidation?
A Member or OSP should carry out the forced position liquidation within the first trading session following market open, unless SHFE has specified a different time limit. If the liquidation process is not completed within the required timeframe, SHFE will carry it out itself. For details, please refer to the forced liquidation chapter of the Risk Management Rules of the Shanghai Futures Exchange and other applicable SHFE rules.
Rules
For detailed rules on forced liquidation of futures and option positions, please see the Risk Management rules of the Shanghai Futures Exchange, the Options Trading Rules of the Shanghai Futures Exchange and other applicable SHFE rules.
Abnormal Conditions
SHFE may take emergency actions to mitigate risks and announce an abnormal condition in any of the following cases:
1. Transactions, settlement, delivery, option contracts' exercise and fulfillment, or other activities cannot be conducted as normal due to such reasons as earthquake, flood, fire, and other force majeure events, or computer system breakdown;
2. Any failure to fulfill the obligations of settlement, delivery, or option contracts' exercise and fulfillment is having or is expected to have material impact on the market;
3. The same-direction limit-locked market exists in the trading of a futures contract, and it is justified to believe that any Member, OSP, Overseas Intermediary, or Client has violated the General Exchange Rules of the Shanghai Futures Exchange or other applicable SHFE rules, which is having or is expected to have material impact on the market;
4. There arises any other circumstance as prescribed by SHFE.
For details, please refer to the Risk Management Rules of the Shanghai Futures Exchange and other applicable SHFE rules.Risk Warning
SHFE may take one or a combination of measures to call attention to and resolve risks when it deems necessary. These measures include (1) requiring a situation report; (2) giving a verbal alert; (3) issuing a written warning; (4) giving a reprimand; (5) releasing a risk warning notice. For detailed rules on risk warning, please refer to the Risk Management Rules of the Shanghai Futures Exchange and other applicable SHFE rules.
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