It’s already a record year for U.S. listed options volumes and there are still two weeks of trading left to go. The OCC isn’t the only clearing house with volumes surging – China’s nascent options on futures products are doing well, too.
Over the past two years, three options on futures contracts have debuted as China’s exchanges continue to push their listed-derivatives frontiers.
Dalian Commodity Exchange (DCE) was first to the options on futures party with soybean meal options launching in spring 2017. Second into the fray in spring 2017 was the Zhengzhou Commodity Exchange (ZCE) with its white sugar options. The most recent options entrant was the the Shanghai Futures Exchange (SFE) which launched copper options in September.
(Reuters reported in September that the next likely product on the horizon is iron ore options at DCE.)
The FIA released its monthly dataset on global exchange-traded futures and options activity for November, which provided an opportunity to look at some recent activity.
Copper options at SFE compete internationally with offerings at COMEX and the LME. The LME traded 142,853 copper options contracts in November, and 40,977 traded hands at COMEX. Meanwhile, 406,794 traded at the SFE. This isn’t an apples to apples comparison, as the underlying futures contract at SFE is for less than half as much copper as its U.S. counterpart, and roughly a fifth that of the LME’s contract, but notable nonetheless for a product in its infancy. The young Chinese challenger is short on open interest, though – it stood at 30,160 at the end of November compared to the LME’s 111,270.
The story around sugar and soymeal is equally encouraging for the Chinese exchanges.
Dalian’s obvious soybean meal options rival is traded at the Chicago Board of Trade (CBOT). The CBOT traded 143,512 soymeal options in November and DCE posted 1,574,202. The CBOT’s underlying futures contract is for nine times as much meal, but even with that math in mind DCE’s volumes represent more beans.
As for ZCE’s sugar options contract, it butts heads with ICE Futures U.S.’s offering. This is the only contract where the entrenched competition still looks dominant. Both exchanges traded in the 500k contract range but ICE’s underlying represents five times more sugar.
These three options contracts don’t even have two years under their respective belts (barely three months for the copper contract!) and are already putting up big numbers. It bodes well for the further expansion of China’s listed options industry.
(Editor’s note: The options volume figures for LME, CBOT and ICE do not include weeklys or other respective commodity variant options contracts.)
January to November 2018 Chinese Options Volumes
Edited by Sarah Rudolph