A number of varieties staged epic plots, and the 2023 portrait of the futures industry was released!

Today is the last day of 2023, looking back on the futures market this year, the situation has changed. In 2023, we have witnessed the continuous record high of domestic gold prices, the continuous decline of lithium carbonate, and the sudden outbreak of container shipping (European line) futures at the end of the year...... A number of varieties have experienced a magnificent market.

In the past year, the registration system for futures market varieties has been fully implemented, the innovation of futures products has been accelerated, the comprehensive strength of futures companies has been further enhanced, and the ability to serve the real economy has been steadily enhanced, and the "Measures for the Administration of Futures Exchanges" has been promulgated, which has improved the quality of the operation of the futures market.

At the same time, the scale of the futures market has steadily expanded, and the variety system has been continuously enriched. As an industry observer, the Chinese reporter of the brokerage hereby takes stock of the futures industry in 2023 and records the development and transformation of the industry.

The futures market has grown steadily

In 2023, the trading volume of the futures market will grow steadily. From January to November 2023, the cumulative trading volume of the national futures market was 7.810 billion contracts and the cumulative turnover was 520.47 trillion yuan, an increase of 27.89% and 6.89% year-on-year, respectively, of which the trading volume of financial futures and options increased most significantly.

The trading volume of the mainland commodity futures market accounts for more than 70% of the global total, ranking first in the world for many consecutive years, and the influence of futures price pricing continues to increase. At the beginning of August this year, the total capital of the mainland futures market once exceeded 1.8 trillion yuan, hitting a record high, and the development of the futures industry has reached a new level.

Luo Xufeng, chairman of Nanhua Futures, said that in 2023, there will be many positive changes in the mainland futures industry, which is gradually adapting to the size and risk management needs of the mainland as a global trading power, and the quality and efficiency of futures services for the real economy are also further improving.

In addition, the OTC derivatives business has developed rapidly, with the nominal principal of the OTC derivatives business exceeding 430 billion yuan at the end of the year from January to October alone, an increase of 112.1 billion yuan from the end of 2022, indicating that the function and influence of the mainland derivatives market are continuously improving. "The current economic and financial situation at home and abroad is not easy, which shows that the development resilience and internal development momentum of the futures market have been steadily improved. Hou Xinqiang, general manager of Jinrui Futures, said.

Looking back on the development of the futures industry in 2023, Li Chao, vice chairman of the China Securities Regulatory Commission, believes that with the official implementation of the Futures and Derivatives Law as an opportunity, the mainland futures market has adhered to the principle of stability and progress, and has generally achieved reasonable growth in quantity and effective improvement in quality, laying a strong foundation for promoting its own high-quality development and serving the overall situation of the real economy.

Multiple varieties stage epic plots

Looking back on 2023, the volatility of the commodity futures market has increased, and many varieties have staged epic plots.

Affected by the U.S. banking crisis at the beginning of the year and the Palestinian-Israeli situation, gold has become the brightest star in the financial market. Among them, the domestic gold price continued to hit a record high, Shanghai gold from about 411 yuan/gram at the beginning of the year, all the way up to the current 485 yuan/gram, an increase of 18% during the year, the international gold price also hit a record high, breaking through the 2100 US dollars / ounce mark, the highest touched 2152.3 US dollars / ounce, an increase of 15% during the year, staged a magnificent gold bull market.

As the core raw material of the power battery industry, the newly listed lithium carbonate futures are one of the most concerned varieties in the market. In the context of oversupply, lithium carbonate has fallen all the way since its listing, from a maximum of 240,000 yuan all the way to a minimum of 85,000 yuan, especially at the end of November and early December, staged a continuous decline and continuous limit of the market, the volume and holdings have risen sharply, the exchange has continued to shoot, and issued regulatory measures to cool down. Since the beginning of this year, lithium carbonate futures have fallen by as much as 57%, becoming the most "bearish" variety in the domestic futures market.

Due to the sudden situation in the Red Sea, the container transportation index (European line) futures continued to rise and fall, becoming the most popular variety in the futures market at the end of the year. Since the fermentation of the Red Sea crisis, global shipping prices have soared three or four times in a week, many shipping companies have avoided the Red Sea, and the container shipping index (European line) futures have soared from less than 900 points to 1700 points, an increase of 123% during the year, becoming the most "bullish" variety in the commodity market.

In addition, Shanghai nickel has experienced a downward trend, from 230,000 yuan at the beginning of the year to 130,000 yuan at present, and the price is close to halving; soda ash once became the most active variety in the market, staged a roller coaster with continuous ups and downs, and finally fell by more than 20% throughout the year; jujube, butadiene rubber, and alumina all rose by more than 20% annually, and were the varieties with the best growth performance.

Variety innovation is accelerating

Since the official implementation of the Futures and Derivatives Law in August 2022, the registration system has been implemented for the listing of futures products, which has significantly shortened the time and process for the listing of new products, and greatly accelerated the pace of innovation. In 2023, a total of 21 new futures and options varieties will be listed in the futures market, and the pace of listing will be significantly accelerated, with the total number of varieties reaching 131, covering major areas of the national economy such as agricultural products, metals, energy, chemicals, shipping, and finance, enhancing the ability of futures to serve the real economy.

At the same time, the new varieties launched this year highlight more novelty. Among them, in July this year, lithium carbonate futures and lithium carbonate options listed on the Guangzhou Futures Exchange are the first lithium carbonate futures varieties in the world to be delivered physically, serving the new energy industry chain and escorting the healthy development of the green industry, which is an important breakthrough for the mainland to strive for the international pricing power of lithium resources;

The Shanghai Futures Exchange successfully launched low-sulfur fuel oil futures to help the bunkering market switch from high sulfur to low sulfur and implement the "dual carbon" strategy.

The listing of new derivatives such as 30-year treasury bond futures and STAR 50 ETF options provides investors with more efficient risk management tools. With the listing of 30-year treasury bond futures, treasury bonds of various key maturities of two-year, five-year, ten-year and 30-year tenors have been covered, forming a treasury bond yield curve from the short end to the ultra-long end.

The acceleration of the listing of varieties and the acceleration of the pace of innovation have further enriched the varieties in the market, established a more complete product system, and continuously optimized the system of trading, delivery and other related links, providing more abundant and comprehensive risk management tools for the upstream and downstream of the industry.

The futures CTA strategy continues to outperform

Standing at the end of 2023, after experiencing various ups and downs in the capital market, the allocation value of managed futures CTA strategies has been known to more and more investors, and futures CTA strategies have gradually become one of the widely concerned investment strategies with their excellent performance and low correlation with the stock market, and have also won more investors' confidence in allocation, but the complex and changeable market has also given rise to the continuous differentiation of managers' investment performance.

According to the data of the private placement network, as of December 22, the average loss of 19,831 private securities products with performance records was 1.59% since the beginning of this year, of which 9,278 products achieved positive returns, accounting for nearly 47%. Among them, the best performer this year is bond strategy private placement products, with an average yield of 8.55% year-to-date, with more than eighty percent of products achieving positive returns, followed by futures and derivatives strategy private placement products, with an average yield of 2.93% this year.

There is no doubt that managed futures CTA strategy products have become one of the few bright spots in the equity investment market, and from the perspective of combing, the ability to resist drawdowns in the first quarter of this year and capture the trend in the third quarter have become the common characteristics of excellent managers this year. In the first half of the year, against the backdrop of the stock market recovery, many CTA products in the market continued their drawdown since June 2022. Commodity markets don't seem to see much opportunity for some time. Investors who couldn't stand the pain began to redeem. However, the opportunity came in the second half of the year. With the rebound in the commodity market, the CTA strategy has strengthened again, and more and more products have recovered their losses during the year and hit new highs in net worth.

In the long run, as an absolute return type of strategy, CTA strategy products have recorded positive returns for many years. According to the research of Peng Jingqiao, chief quantitative strategy researcher of the Research and Development Department of China Securities Construction Investment Futures, the futures and derivatives strategy index has performed well in the past five years, with an annualized return of about 12%, exceeding the return of similar bond and equity strategies. Moreover, through the calculation of returns in the past two years, the correlation between CTA strategies and stock and bond strategies is close to 0.3. As an important part of decentralized configuration, CTA policies deserve to be included in the management pool.

Industry supervision has been further improved

The key to the high-quality development of the futures market is the soundness of the futures exchange system. The Measures for the Administration of Futures Exchanges, which came into effect on May 1, 2023, further consolidate the responsibilities of futures exchanges and become a major event in the futures market in 2023.

It is worth noting that in recent years, futures exchanges have continuously explored the futures regulatory system and business model with Chinese characteristics, continuously ensured the smooth operation of the market to promote the functions of the futures market such as price discovery, risk management and resource allocation, and improved the operation quality of the futures market by further enriching the product system and optimizing product rules to attract more business entities to participate.

In particular, this year, futures exchanges have further enhanced their ability to serve the real economy by optimizing the delivery layout and innovating delivery rules. In April this year, the Shanghai Futures Exchange shortened the circulation time of money and goods of 15 key varieties from 3 consecutive working days to 2 working days; Dashang added corn delivery warehouses in production and marketing areas such as Northeast China to guide the agglomeration of industrial resources; Zhengshang launched a general futures warehouse receipt that can be used in multiple delivery warehouses to reduce the time and capital cost of cross-regional transportation of commodities such as purified terephthalic acid (PTA), and for example, jujube futures have set up a total of 13 delivery warehouses across the country, including 10 in Xinjiang, 2 in Hebei, 1 in Henan, and so on.

In order to regulate derivatives trading and related activities, improve market transparency, and prevent and resolve market risks, the China Securities Regulatory Commission (CSRC) issued the Measures for the Supervision and Administration of Derivatives Trading (Consultation Draft) in March 2023, and the second Consultation Draft on November 17. In addition, the China Securities Regulatory Commission (CSRC) has also revised the Measures for the Administration of Futures Practitioners to actively protect the legitimate rights and interests of all parties involved.

Hou Xinqiang said that the mainland futures industry has gradually changed from a regulatory environment of "strong supervision" to a regulatory model of "supervision + development", and the development foundation has been further consolidated.

Futures companies explore the path of high-quality development of the industry

In the context of intensified capital market shocks, the rights and interests of futures companies and their asset management business are also affected to varying degrees. However, futures companies are more stable in exploring the road of high-quality development of the industry, and they are also more solid in serving the quality and efficiency of the real economy.

From the perspective of domestic futures companies, as of the end of October 2023, there are 150 futures companies in the country, with net assets of 192.904 billion yuan and net capital of 117.035 billion yuan, an increase of 6.85% and 5.59% year-on-year, respectively. According to the results of the classification evaluation of futures companies in 2023, there are 55 companies rated as Class A and above, accounting for 37%, compared with the results of the classification evaluation in 2022, the total number of Class A and Class B companies has increased, and the number of Class C and D companies has decreased.

From the perspective of futures company operation, according to the latest data from the China Futures Association, in the first 11 months of this year, the operating profit and net profit of futures companies across the country were 11.480 billion yuan and 8.112 billion yuan respectively, down 7.23% and 7.73% year-on-year respectively. Obviously, judging from the overall operation of the futures market in the first 11 months of this year, it still shows the characteristics of "increasing production but not increasing income".

Under the influence of market fluctuations, as of the end of November, the equity of customers in the whole market was 1,419.044 billion yuan, a slight increase of 0.37% month-on-month and a year-on-year decrease of 3.30%. In terms of asset management business, as of the end of October 2023, a total of 2,167 asset management plans have been filed and operated normally, with net assets of 279.912 billion yuan.

The futures industry has further matured its model of supporting rural revitalization. Since the beginning of this year, the consensus and norms of "insurance + futures" to serve rural revitalization have been continuously strengthened, and the innovative model of "insurance + futures" has also achieved more results. As of the first half of this year, a total of 73 futures companies have provided risk management services for 18 agriculture-related varieties such as pigs, corn, apples and natural rubber through the "insurance + futures" model, with a cumulative insured value of 134.604 billion yuan and 4.493 billion yuan in compensation, and the project covers 1,224 counties in 31 provinces (autonomous regions and municipalities directly under the central government), covering 5.39 million rural households.

Established in an entity and looking forward to expanding new business

With the improvement of a series of regulatory policies and regulations, the innovation and development of the mainland futures market has entered the fast lane.

Looking forward to 2024, Hou Xinqiang pointed out that the development opportunities of the futures industry come from the depth, breadth and service capabilities of serving the real economy, and the specialization, specialization and informatization of futures companies will be more prominent. In the future, futures companies will continue to interpret the rules of the strong and the strong, and the development connotation of their derivatives integrated service providers will become richer and richer.

Luo Xufeng also said that futures companies should be based on service entities, focus on their main responsibilities and main businesses, and focus on the effective play of the functions of the futures market to further support the development of major national strategies, key areas and weak links. In August 2022, the Futures and Derivatives Law came into effect, bringing derivatives trading into the scope of legal adjustment.

"At present, the specific implementation rules have not yet been clarified, and the revision of the Measures for the Supervision and Administration of Futures Companies has not yet been officially implemented, involving key issues in the industry, including over-the-counter business, the return of market-making business to the parent company, and the cross-border business development of futures companies. It is hoped that in 2024, the implementation rules for relevant businesses will be gradually promulgated, pointing out a new development direction for futures companies and bringing new development opportunities. Luo Xufeng said.

Hou Xinqiang believes that in 2024, the "Measures for the Supervision and Administration of Futures Companies" is expected to be released after soliciting opinions, the expansion of the scope of futures business, the return of market-making business and over-the-counter derivatives business to the parent company, and the pilot of proprietary trading and futures margin financing business are expected to be opened, which will lay a legal foundation for futures companies to forge solid derivatives trading capabilities and provide one-to-one risk management services, and will also accelerate the unique price discovery, risk management and resource allocation functions of the futures industry in the financial ecology.

Editor-in-charge: Yang Yucheng

Proofreading: Liao Shengchao