Dalian Commodity Exchange has recently held an explanation session on Pilot work to interpret the ideas, notification requirements, and specific procedures for launching OTC options in 2018. This year, Dalian Commodity Exchange will further expand the pilot project, increase its support, integrate Exchange-traded Options and OTC Option to provide related industries with more flexible, accurate, and personalized services.
It’s reported that OTC option in recent years has become another innovative means for companies to use the futures market for risk management. OTC option can be demanded by enterprises, and products are designed by risk management companies, securities companies, banks, and other professional organizations. The specialized services can meet the individualized risk management needs of enterprises and reduce the enterprise's risk management costs. For leading enterprises, the characteristics of Insurance such as easy understanding of OTC option products and controllable risks of OTC option products, to a certain extent, can eliminate the concerns of enterprises using futures for risk management. For small and medium-sized enterprises, OTC option allows companies to participate in the futures market without investing too much effort in building a team, which helps reduce the cost of participating in the futures market.
In 2017, Dalian Commodity Exchange supported 21 futures companies, 5 brokers and 3 banks to complete 42 OTC option pilots, providing risk management services for leading companies such as Anshan Iron & Steel and Hunan Valin Steel.
In 2018, Dalian Commodity Exchange OTC Option Pilots involved 14 varieties. The minimum quantity on hand of single OTC option for three chemical products such as PVC must reach 1,000 tons, coking coal and coke 10,000 tons and iron ore 20,000 tons. In addition to chemical products, the target of the pilot service is the entity enterprise in production or consumption, and the size of the enterprise should match the minimum spot requirement of the single OTC option, and the same entity enterprise can only participate in at most one pilot.