Shanghai to Launch New Electricity, Computing Power Futures

Shanghai will promote the continuous expansion of its derivatives market product system and explore new derivative products, such as electricity and computing power futures, to build itself into a global asset management hub.

Shanghai will accelerate the launch of liquefied natural gas futures and options, prepare for electricity and computing power futures, steadily expand the product line of shipping index futures, and develop more new types of futures that represent the direction of new quality productive forces, according to a new policy document released by the municipal government on June 2.

The city has two derivatives trading centers: the Shanghai Futures Exchange and the China Financial Futures Exchange. The former offers 25 types of futures and 20 types of options covering major commodities, such as gold, crude oil, copper, and aluminum. The latter provides stock index futures for the CSI 300 Index, the SSE 50 Index, the CSI 500 Index, and the CSI 1000 Index, as well as treasury bond futures with maturities of two, five, 10, and 20 years.

Shanghai will further enrich equity and interest rate derivatives, such as launching new futures and options for the Star Market 50 Index, the Shenzhen 100 Index, and the ChiNext Index, introducing treasury bond options based on existing treasury bond futures, and exploring pilot programs for Chinese yuan foreign exchange futures trading, according to the policy document.

The development of computing power futures, electricity futures, and the promotion of the Star Market 50 index futures indicate that Shanghai is trying to build a derivatives system aligned with new quality productive forces to provide technology companies with risk management tools throughout their lifecycle and support a virtuous cycle of technology, industry, and finance, Jing Chuan, visiting professor at Xi’an Jiaotong University, told Yicai.

As a testing ground for financial reform, Shanghai will offer a model for other Chinese exchanges if it successfully launches and operates computing power futures and electricity futures, Jing added.

China’s derivatives market is dominated by commodity futures, with financial futures accounting for a relatively small share. Shanghai’s efforts to comprehensively develop equity, interest rate, and foreign exchange derivatives will help address the structural imbalance in China’s derivatives market and integrate the country into international mature markets, Jing said.

Last month, the Chicago Mercantile Exchange announced a partnership with index provider Silicon Data to launch the world’s first computing power futures market later this year.