China Preparing to Open Energy Futures Markets to Foreign Investors

Wasting no time with New Year's eve celebrations, the Chinese securities market watchdog, the China Securities Regulatory Commission (CSRC), issued draft guidelines preparing to open the local futures market for access to foreign investors.

With Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term rampant on the local commodity futures markets, the regulator is seeking foreign investors to deliver additional Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term to the market and secure a more stable environment. The first product which will be provided to foreign investors are crude oil futures, with the prospects for other energy markets on the table.

While foreign investors have already gained access to local stock indices futures, the volatile commodity and bond markets have a history of being very speculative due to poor liquidity conditions.

Back in October, the Shanghai International Energy Exchange (INE) signed a strategic cooperation agreement with Singaporean bank, DBS, to facilitate the incoming internationalization of the energy futures market.

Later, the President and CEO of INE, Chu Juehai, also met with the chairman of the Dubai Mercantile Exchange (DME), and both entities signed a Memorandum of Understanding (MoU) in Dubai.

The move is expected to bring the Chinese energy market more in line with fundamentals, amid concerns by authorities that there is an issue with speculative entities. With added liquidity, price discovery will improve, as more market players always make it harder for relatively small entities to engage in price manipulation.