China's oil futures trading is scheduled to begin finally later this year, after several delays, providing one of the world's top consumers with a larger view on Asian oil prices, not to mention an entry in a Trade worth billions of dollars a day.
The Shanghai-based International Energy Exchange, where the contract will be negotiated, said it is currently working on finalizing some technical issues, Reuters told stock exchange officials. This comes after years of delays.
More than 6,000 trade accounts have already been opened, nearly 75 percent of which are accounts of individual merchants. Overall, the oil futures market is dominated by institutional investors, Reuters reports. In China, however, individual traders, also sometimes called "pajamas merchants", are a force to be taken into account because of their absolute number - to date probably around 100 million. These traders account for 80 percent of turnover in the Chinese stock market, worth about $ 8 trillion.
In addition to individual traders, however, large local energy companies and kettle refiners have also opened accounts. PetroChina has opened two and Sinopec has even created a special trading unit. These two, and other large companies, will provide liquidity for the Chinese oil futures market, except for local banks, which are barred from trading in futures.
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Some 150 brokerages have also been registered for oil futures contracts, including UBS and JPMorgan's local divisions, but INE - the exchange - said it hopes to attract other foreign investors as well.
According to Reuters, however, some potential foreign traders have reservations because Shanghai futures will be priced in yuan. Foreign traders are also worried about the daily price fluctuation limit, which has been set at 4 percent. There is no mechanism to re-establish price caps after a major international move, so China's futures contract may freeze while prices elsewhere are still moving.