Shanghai to Launch Silver Futures Soon

SHANGHAI, Apr. 18 (SMM) – Shanghai Futures Exchange has published April 17 an article collecting feedback on its silver futures contracts which will soon be launched. Chinese silver futures contracts will help establish uniformed silver pricing and provide an effective tool to mange market risk. They are also expected to help optimize silver resource distribution, regulate market order and increase trade efficiency, so as to aid development of the Chinese financial industry.

Stronger Say over Price
Adding of silver futures into existing copper, aluminum, lead, zinc, gold and steel futures in China is a key step for Chinese businesses to gain a stronger say over commodities prices. Though China is the world’s largest silver producer and consumer, silver has been priced based on London and US silver prices in both domestic and overseas trade, causing distorted reflection of the silver supply and demand scenario in China.

The silver futures contracts to be launched in Shanghai is not a complete abandon of global silver pricing, though, but will be priced in consideration of both overseas and Shanghai silver prices, to more accurately present the Chinese silver market and offer Chinese businesses stronger say over silver prices.

Good for Risk Management
Amid climbing raw material prices, increasing globalization and wide-spread speculation, futures contract serves as a great risk management tool, especially for silver whose production is a prolonged and hard-to-change process. Chinese silver futures contracts also give Chinese silver producers better risk management which they have been unable to get in overseas silver futures markets.

A domestic futures contract not only helps hedge price risks but also avoids problems that might appear in overseas futures markets. In addtion, standardized silver quality can help promote silver brands and regulate silver production.

Opportunities Come with Risks
The launch of silver futures in China will absolutely draw more participants into the Chinese financial futures market. Due to its new establishment, however, it will also bring tremendous risks, of which investors should be aware.