The Shanghai Shipping Exchange, which started trading container freight derivatives on June 28, is asking the Chinese government to relax regulations to allow China’s state-owned shipping lines to take part in the market.
The group says the success of the trading instrument “depends on whether Chinese government regulations will be relaxed to allow participation by its state-owned shipping companies, which were banned from using derivative products in the wake of the global financial crisis.”
In a statement posted on its Web site, the SSE said the derivatives product “could see China wield greater influence on the evolution of shipping’s most controversial instruments.”
The SSE hopes to convince the government to lift its ban by the end of 2011. The electronic trading platform that was launched this week is a trial run, which could be expanded to include the larger shipping companies.
SSE president Zhang Ye said all the big Chinese shipping companies, including Cosco and China Shipping, were very interested in the concept of container freight derivatives.
Privately owned shipping companies are allowed to trade derivatives and are among the key targets for the new trading platform, together with shippers, enterprises and individuals.
Operated by an SSE subsidiary company called the Shanghai Shipping Freight Exchange Co., the platform allows participants to hedge their risk on a six-month forward basis on the two key container shipping routes for Chinese exports — Shanghai to Europe and Shanghai to the U.S. West Coast. http://www.joc.com/container-shipping/shanghai-exchange-launches-container-futures-contracts
Contracts are priced in U.S. dollars but settlement, which is based on the Shanghai Containerized Freight Index, is in yuan through participating Chinese banks that include the Bank of China and ICBC.
The operation is separate from the derivatives trading managed by Clarksons using the SCFI.