Advanced Positioning, Flow, and Sentiment Analysis in Commodity Markets, 2nd Edition

CHAPTER 13Chinese Commodity Markets – Analysing Flow

Chapter objectives

• 13.1 The Chinese Commodity Exchanges
• 13.2 The Size of the Chinese Commodity Exchanges
• 13.3 Speculative vs Hedging Activity in Chinese Commodities
• 13.4 The Flow Cube and Build Ratio in Chinese Commodities
• 13.5 The OBOS Framework and the Speculation Ratio

This chapter focuses exclusively on the Chinese commodity futures markets, with the primary objective of defining, assessing, and tracking the level of trading activity, and specifically speculative activity, that frequently dominates the newsflow on these exchanges.

As there is no equivalent CFTC Commitment of Traders (COT) report for Chinese exchanges, insight on trading activity for these exchanges can be approximated using the Speculation Ratio (SR) indicator and the Build Ratio (BR) indicator.

A new Overbought/Oversold OBOS model for Chinese commodities, based on extremes in price and the SR, is also developed.

13.1 The Chinese Commodity Exchanges

There are three main Chinese commodity futures exchanges, the Dalian Commodity Exchange (DCE), the Zhengzhou Commodity Exchange (ZCE), and the Shanghai Futures Exchange (SHFE), of which the Shanghai International Energy Exchange (INE) is a subsidiary.

13.1.1 The Shanghai Futures Exchange (SHFE)

The Shanghai Futures Exchange (SHFE) is under the uniform regulation of China Securities Regulatory Commission (CSRC) and organises the futures trading approved by CSRC in accordance with the principles of openness, ...