Dalian exchange tightens trading limits for iron ore futures

China’s Dalian Commodity Exchange (DCE) has tightened its limits on the opening of positions to 2,000 lots per day for non-brokerage members or clients on all iron ore futures contracts from Tuesday December 22.

In an announcement on Monday evening, it said it would restrict the opening of positions – both long and short – to 2,000 lots per day on all iron ore futures contracts for such members and clients.

This followed a surge of 101 yuan ($15) per tonne by the exchange’s May contract, which has the highest open interest, at the close of trading on Monday December 21 in comparison with last Friday’s settlement price of 1,043.50 yuan per tonne.

These limits do not apply to hedging or market-making positions, however, the DCE said.

Earlier this month, the DCE implemented a 5,000-lot-per-day limit on the May iron ore futures contract for non-brokerage or clients. This limit came into effect on the night trading session of December 11.

The exchange also implemented other measures for its iron ore futures contract this month.

For instance, on December 18, the DCE said that the intra-day trading fee rate for iron ore futures would be raised to 0.01% for the trading turnover, compared with 0.001% – or 0.04% specifically for the January, May and September contracts – previously. The 0.01% rate took effect from the night trading session of December 21.

Sources said the DCE had resorted to these measures to better control market risks and limit speculative sentiment.

A trading source in Shanghai said that strong supervision would help to stabilize the market and reduce the volatility affecting the market recently, which had intensified beyond expectations.

“The new trading limit depressed the trading sentiment in the iron ore futures market today. As a result, the market cooled down and some price corrections emerged,” he added.

On Tuesday December 22, the most-traded iron ore May futures contract on the DCE closed at 1,055 yuan per tonne, down by 53 yuan per tonne (4.8%) from Monday’s settlement price of 1,108 yuan per tonne.