Shanghai Futures Exchange Incorporates Nickel & Tin to Finish Adjustment of Nonferrous Metal Index



Shanghai Futures Exchange Incorporates Nickel & Tin to Finish Adjustment of Nonferrous Metal Index

After close of trading on August 12, the nonferrous metal futures price index adjustment & optimization work of Shanghai Futures Exchange was completed and formally took effect. The new compilation plan incorporated two newly marketed varieties of nickel and tin, and made adjustment and optimization in original index calculation formula & variety weight upper/lower limit, weight adjustment window, weight re-allocation method, daily rise/fall calculation, and incorporation time of new variety etc.

Shanghai Futures Nonferrous Metal Index was formally introduced on December 26, 2012. The new compilation plan cut weight upper limit of all component merchandises from 80% to 60%, and lifted weight lower limit from 5% to 8%, all component merchandises received more balanced and reasonable weight allocation, the diversification effect was improved. This not only reduced excessive impact of fluctuation in single variety on the index trend, but also enhanced liquidity of the previously inactive futures variety market, and helped physical enterprises solve the needs for hedging.

Furthermore, from the perspective of cautious risk management, Shanghai Futures Exchange straightened out and optimized index compilation details, which facilitated better control of potential risk spots. In the process of detail optimization, Shanghai Futures Exchange earnestly listened to feedback from the domestic market, and borrowed mature practices of the international market, so that relevant details of index weight adjustment became more reasonable. The optimization of details not only kept market risk and operation risk etc under control, but also enabled index to move closer to real investment yield curve, so as to facilitate participation by institutional investors. The plan after adjustment & optimization became more aligned with mature merchandise index plan on the international market, and incorporated two new varieties of nickel and tin. Historical data of the index remained unchanged.