On 27 May 2025, the Shanghai Futures Exchange (the “SHFE”) released for public consultation a comprehensive set of proposed and revised business rules (the “SHFE Rules”), marking a significant step toward the internationalization of the SHFE’s futures market. The SHFE Rules aim to align the SHFE’s regulatory framework with international standards across five key areas: market access, trading, clearing, risk control and delivery.
A central focus of the reform is to enable participation by overseas entities—including overseas special participants (the “Overseas Special Participants”), overseas intermediary institutions (the “Overseas Intermediaries”), and overseas clients (collectively, “Overseas Participants”)—in the entire transaction lifecycle of futures trading under the existing framework set out by the Interim Measures for the Administration of Domestic Futures Trading of Specific Varieties by Overseas Traders and Overseas Brokerage Institutions (《境外交易者和境外经纪机构从事境内特定品种期货交易管理暂行办法》) (the “OI Route”), providing the Overseas Participants with end-to-end access to certain domestic futures products.
1.Market Access and Key Players
After the SHFE Rules come into effect, the Overseas Participants are able to choose the following routes to proceed with the trading on the SHFE.
*Currently, the mechanism of the Overseas Special Participants is still unavailable on the Zhengzhou Commodity Exchange, which means the overseas investors shall engage a PRC futures broker (the “PRC Futures Broker”) or Overseas Intermediary to conduct onshore trading on the exchange.
(a) SHFE Members (PRC Futures Brokers): refer to corporations or economic organizations registered in the mainland China and approved by the SHFE to conduct futures trading on the SHFE. The SHFE Members may accept orders from overseas clients, and the Overseas Intermediaries.
(b) Overseas Special Participants: refer to overseas institutions that satisfy the prescribed conditions of the China Securities Regulatory Commission (the “CSRC”) and the SHFE, and are approved by the SHFE to trade directly on the SHFE, and classified into the OSBP (which may accept orders from overseas clients and the Overseas Intermediaries) and overseas special non-brokerage participant (the “OSNBP”). Kindly note that although the Overseas Special Participants may trade directly, settlement and delivery shall still be carried out by the SHFE Members.
(c) Overseas Intermediaries: refer to overseas brokers that do not trade directly on the SHFE but authorize the PRC Future Broker or OSBP to conduct trading and clearing activities. The Overseas Intermediaries may accept orders from overseas clients.
2.Qualification Criteria and Post-admission Procedure
(a) Qualification Criteria of OSBP
In accordance with Article 9 of the Consultation Paper of Overseas Special Participants Management Rules of the Shanghai Futures Exchange (the “SHFE OSP Rules”,《上海期货交易所境外特殊参与者管理办法(公开征求意见版)》), an applicant to be an OSBP shall meet the following criteria:
(i) its home jurisdiction has sound legal and regulatory systems;
(ii) it has sound financial conditions, good credit and sufficient working capital;
(iii) it has a sound corporate governance structure, a sound internal control system and duly operated business;
(iv) the futures regulatory authority in its home jurisdiction has entered into a memorandum of understanding on supervisory cooperation with the CSRC;
(v) it is incorporated overseas and holds a futures brokerage license in its home jurisdiction;
(vi) it acknowledges and agrees to abide by the business rules and the provisions and decisions of the SHFE;
(vii) it has a net capital of no less than RMB thirty (30) million or its equivalent in foreign currency;
(viii) its business has been operated for more than two (2) years consecutively;
(ix) it has the personnel, futures business trading system, facilities and premises that are necessary to conduct business;
(x) it has a sound financial management system, a sound futures business management system and good operational capacities, credit and reputation, and under normal operational condition;
(xi) it has authorized a business organization or representative institution that has been validly existing in the mainland China for no less than one (1) year as its designated contact institution, and has appointed a senior manager or a staff with good credibility of such business organization or representative institution as its designated contact person; and
(xii) any other requirements prescribed by the SHFE.
The SHFE is entitled to waive one or more conditions above depending on certain financial conditions, risk management capabilities and soundness of operation of the applicant.
(b) Qualification Criteria of OSNBP
In accordance with Article 10 of the SHFE OSP Rules, an applicant to be an OSNBP shall meet the following criteria:
(i) its home jurisdiction has sound legal and regulatory systems;
(ii) it has sound financial conditions, good credit and sufficient working capital;
(iii) it has a sound corporate governance structure, a sound internal control system and duly operated business;
(iv) it acknowledges and agrees to abide by the business rules and the provisions and the decisions of the SHFE;
(v) it has a net capital or net assets of no less than RMB ten (10) million or its equivalent in foreign currency;
(vi) it has the personnel, futures business trading system, facilities and premises that are necessary to conduct business;
(vii) it has a sound financial management system, a sound futures business management system and good operational capacities, credit and reputation, and under normal operational condition;
(viii) it has authorized a business organization or representative institution that has been validly existing in the mainland China for no less than one (1) year as its designated contact institution, and has appointed a senior manager or a staff with good credibility of such business organization or representative institution as its designated contact person; and
(ix) any other requirements prescribed by the SHFE.
The SHFE is entitled to waive one or more conditions above depending on certain financial conditions, risk management capabilities and soundness of operation of the applicant.
(c) Post-admission Procedure
Further to the above, Article 15 of the SHFE OSP Rules outlines the post-admission procedures that must be completed; failure to do so may be deemed a voluntary forfeiture of the qualification. Specifically, within ninety (90) days of receiving the admission notice from the SHFE, the applicant must complete the following procedures:
(i) entering into an agreement with the SHFE;
(ii) paying trading seats fees at the prescribed rate separately announced by the SHFE;
(iii) opening a futures settlement account with the designated depository bank of the SHFE in accordance with the provisions;
(iv) submitting the authorized settlement agreements entered into with the SHFE Members to the SHFE;
(v) performing the authorization procedures for relevant personnel and seals;
(vi) providing the resumes and certificates of no less than two (2) personnel who have passed the futures qualification exams in the mainland China; and
(vii) any other required procedures.
3.Eligible Products
Currently, the commodities traded on the SHFE—including those listed on the Shanghai International Energy Exchange (the “INE”), a wholly owned subsidiary of the SHFE established to support Chinese efforts to internationalize its commodity markets—are set out below. The commodities listed on the INE (underlined in the follow chart) have already been opened to offshore investors under the OI Route. In this round, the SHFE intends to optimize the business rules for all of these commodities. The regulator will determine which products will ultimately be made available to overseas investors.
4.Other Key Aspects
(a) Business Norms
The SHFE Rules enhance the oversight of the Overseas Participants by strengthening the management of trading seats, trading codes, and account-opening procedures, and introduce supplementary requirements for overseas clients and the OSNBP applying for hedging and arbitrage trading quotas, set out regulatory requirements for options trading, exercise, and settlement by the Overseas Participants, and improve the information disclosure mechanism.
(b) Risk Controls
The SHFE Rules introduce position limit standards for the Overseas Participants, clarify the thresholds for large position reporting, refine the conditions under which forced liquidation may occur, and enhance the reporting regulation of actual control relationships.They also provide clearer guidance on the identification and handling of abnormal trading behavior, as well as the circumstances constituting violations and the corresponding enforcement measures.
(c) Settlement and Delivery
The SHFE Rules designate RMB as the settlement currency, introduce foreign exchange as an eligible asset for margin, and clarify scenarios where the exchange is mandatory. They also enhance the tiered and entrusted settlement mechanisms and clarify the types of futures settlement accounts and the related cash flow management regulations.
In terms of the delivery system, the SHFE Rules refine and clarify the circumstances under which positions are deemed non-deliverable and the corresponding handling procedures, thereby strengthening the closed-loop management of the entire futures trading process.
The internationalization of SHFE Rules marks a pivotal advancement in the SHFE’s commitment to integrating international participants into its market framework.
If you would like to know more information about the subjects covered in this publication, please contact:
Sandra Lu
+86 21 3135 8776
Lily Luo
+86 21 3135 8732