SHFE lowers minimum fluctuation level for HRC futures

The Shanghai Futures Exchange has revised its futures contract for hot rolled coil, in a bid to enhance market participation in the flagging paper contract.

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The exchange has lowered the minimum fluctuation level for HRC futures trading to 1 yuan ($0.16) per tonne from a previous level of 2 yuan ($0.30) per tonne, it said in a statement on Wednesday April 22.

The change, which will take effect from April 27, is based on market feedback that the previous value of 2 yuan ($0.30) per tonne was too high, considering the steep fall in HRC futures prices since its launch in March last year. This has resulted in relatively high trading cost for participants, and has curbed market efficiency and further optimisation of market structure, according to SHFE.

The closing price for the most-traded October HRC futures contract on SHFE was 2,327 yuan ($380) per tonne on Wednesday April 22, down 30% compared with the closing price of 3,324 yuan ($543) per tonne on its debut on March 21, 2014.

After the adjustment, the minimum fluctuation for the SHFE HRC futures contract will be the same with that for the exchange’s rebar futures contract.

The minimum fluctuation is the minimum unit for price change in financial product trading. A reasonable minimum fluctuation is helpful to enhance the efficiency and liquidity of the contract, and can lower trading cost for participants.

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