Trading Rules of Dalian Commodity Exchange

Transcription

1 Trading Rules of Dalian Commodity Exchange Chapter 1 General Provisions 1. Subject to the State laws, regulations and policies that are applicable and Bylaws of Dalian Commodity Exchange (the Bylaws ), Trading Rules of Dalian Commodity Exchange (the Trading Rules ) is enacted to protect lawful rights and interests of futures market participants and interests of the public. 2. The principal business of Dalian Commodity Exchange (the Exchange ) is to organize trading of futures contracts approved by the China Securities Regulatory Commission ( CSRC ) in accordance with the principles of openness, fairness, equity and integrity. 3. The Trading Rules is applicable to all business activities conducted on the Exchange. The Exchange, Exchange members, investors, Designated Delivery Warehouses, Designated Settlement Banks and employers of the above-said organizations must comply with the Trading Rules. Chapter 2 Listed Products and Futures Contracts 4. Listed products of the Exchange include Soybeans, Soybean Meal, Barley and others approved by CSRC. 5. The days the Exchange shall be open for business are every Monday through Friday (with exceptions of national holidays). The hours of each such day when transactions of each product may be made on the Exchange shall be announced by the Exchange separately. 6. The term futures contract means a standardized contract designed by the Exchange calling for the delivery of a commodity of a specified quantity and quality at a specified date and a specified location. 7. The specifications listed in a futures contract include but not limited to: contract name, underlying commodity, contract size, price quote, minimum price interval, daily price limits, delivery month, trading hours, last trading day, last delivery day,

2 deliverable grades, delivery points, minimum margin requirements, transaction fee, delivery pattern and ticker symbols. The appendix to a future contract shall possess the legal validity equal to that of the contract itself. 8. The term minimum price interval means the minimum increment or decrement of price movement that is allowable for a contract. 9. The term daily price limits means the maximum prices range of a trading day set for a contract. Any price quotation beyond this range shall be treated as null and void, and therefore shall not be accepted. 10. The term delivery month of a future contract means the month specified in a futures contract in which physical delivery may take place under the term of the contract. 11. The term last trading day means the final day in which trading of a given futures contract may occur in the delivery month. 12. The classifier for the unit of contract is contract and futures trading shall be conducted in the units resulted from the multiplication of one contract. The size of underlying commodity of a contract shall be specified in the futures contract of the underlying. 13. The currency used for price quote and settlement of a futures contract is RMB. The price unit is Yuan. Chapter 3 Management of the Trading Hall 14. The Trading Hall is a centralized marketplace where transactions of futures contracts shall take place. The Exchange shall manage the Trading Hall in accordance with applicable rules and regulations. The Exchange shall permit eligible members to participate in the centralized price competition on the Exchange through their remote trading seats pursuant to the regulations of CSRC. 15. The floor representative shall be an individual who has been designated by a member and represent the member to conduct futures trading in the Trading Hall in

3 accordance with instructions of the member. A member may have more than one floor representative. 16. The floor representative shall satisfy applicable requirements of CSRC for professionals of the futures industry, have been trained by the Exchange and passed its examination, and obtained the Certificate for Floor Representative in Dalian Commodity Exchange. 17. The floor representative shall not take orders from or provide advice or consultation to any organization or individual besides the member who has designated him. The floor representative is prohibited from trading for himself. 18. The floor representative shall have the rights to use various facilities and services provided by the Exchange and make comments on and suggestions for trading practices. The floor representative shall also have the obligations to comply with the business regulations of the Exchange, subordinate himself to the Exchange s management and protect public facilities. 19. During trading hours, the Exchange shall designate one executive officer (the Officer ) to oversee trading activities and several staffs (the Staffs ) to manage the business in the Trading Hall. 20. The Officer and the Staffs are the managing officials of the Exchange who shall oversee trading activities in the Trading Hall and ensure orders of trading are observed. Their major responsibilities are as follows: declaring the opening and closing of the marketplace; following daily price limits adjusted in accordance with related rules and regulations; supervising and enforcing mandatory position liquidations in accordance with rules; making adjustment to the trading rights and privileges of trading memberships in accordance with rules managing the Trading Hall; keeping the orders of the Trading Hall; managing other pertinent affairs by the power authorized by the President.

4 21. No one but the following individuals shall be admitted to the Trading Hall: 21.1 floor representatives of members; staffs of the Exchange who manage affairs in the Trading Hall; individuals with special permit issued by the Exchange. 22. The floor representative shall adhere to the Exchange s Dress Code Policy and carry a trading badge. No floor representative shall enter the Trading Hall before the time specified by the Exchange. 23. The Staffs shall adhere to the Exchange s Dress Code Policy and carry their access badges while entering and staying in the Trading Hall. 24. An individual with special permit shall have the permit prior to entering the Trading Hall and be accompanied by an Exchange employee. Such individual is strictly prohibited from participating in or disrupting trading. 25. The staffs of the Exchange shall have the authority to issue a warning to a floor representative who is in violation of the procedures and regulations of the Trading Hall, remove him if the violation is serious, and take disciplinary sanction against him in accordance with applicable rules. Chapter 4 Brokerage Member and Non-Brokerage Member 26. Members of the Exchange are classified into two categories: members of brokerage firms (the Brokerage Member ) and members of non-brokerage firms (the Non-Brokerage Member ). The Exchange may establish a special category of members to if it is needed for its trading or/and clearing business. 27. An investor who entrusts a Brokerage Member with executions of trading orders shall register with the brokerage firm and open an account with the firm first. Investors may be classified into institutional investors and individual investors. 28. Upon the acceptance of an investor s account application, the Brokerage Member shall provide the investor with Risk Disclosure Statement for Futures (the Statement ). An individual investor shall sign the Statement himself after having read it carefully and comprehended it adequately; an institutional investor shall have

5 its legal representative (the person in charge) affix his signature and an official seal to the Statement. 29. The Futures Brokerage Agreement (the Agreement ) shall be signed by both the brokerage firm and the investor as a standard procedure of accepting an investor s account application. An individual investor shall sign the Agreement himself and an institutional investor shall have its legal representative (the person in charge) sign the Agreement. 30. The Brokerage Member shall submit such material as investors registration forms, business licenses, photo copies of identification cards to the Exchange to have them file on record in accordance with rules of the Exchange. 31. A Trading Code System shall be implemented on the Exchange by which Brokerage Members and investors shall abide. The Trading Code system shall match each account of an investor with a unique code. Trading under a mismatched account or a mismatched code is strictly prohibited. 32. Pursuant to applicable rules, a Brokerage Member may take an investor s trading order through written instruction, telephone, computer network, internet ordering systems or other methods prescribed by CSRC. 33. Immediately upon receiving of a customer s written order the staff of each Brokerage shall number, date, time-stamp and sign the order. One copy of the signed order shall be returned to the customer for his record. 34. Types of trading orders: Limit Order: an order that shall be executed either at the price set up by the customer or a better price; Canceling Order: an order in which the customer deletes a previous order; other types of orders prescribed by the Exchange. 35. An order shall be valid until the end of that trading day. Before the execution of the order, the customer may alter or cancel the order. 36. Orders received by each Brokerage Member from its customers shall be all entered into the Exchange s central matching system to exercise. 37. The Brokerage Member shall charge its customers commission fees and collect

6 due taxes from customers on behalf of the State. 38. The Brokerage Member shall be responsible to truthfully report to its customers the firm s financial and credit situations and business operations, and provide customers with information and consulting services. 39. Upon the closing of the market of each trading day, the Brokerage Member shall prepare its settlement report for its customers. The customer shall have the right to inquire the content of the settlement report within the timeframe and by the methods prescribed in the Agreement. 40. The Brokerage Member shall exercise a customer s order in accordance with the customer s instruction and ensure the customer s confidentiality. 41. The Brokerage Member shall take full responsibility for any trade it has exercised, and the customer shall take full responsibility for every order executed in accordance with his instruction. The customer is entitled to report issues he has encountered in entrusted trading to the Exchange. 42. A Non-Brokerage Member shall have a special account in a Settlement Bank designated by the Exchange and deposited sufficient fund prior to entering proprietary orders. Chapter 5 Trading Practices and Procedures 43. The term Futures Trading means the trading activities of buying or selling certain futures contracts in the centralized marketplace of a futures exchange. 44. The term Transaction Price of Futures Contract means the price of the standardized deliverable underlying commodity defined in a futures contract at the time when it was delivered to a Reference Delivery Warehouse with Value-Added Tax included. 45. The futures contract shall specify the standardized deliverable underlying commodity. If a substitute shall be used, the premium or discount of the substitute shall be prescribed separately by the Exchange and submitted to the CSRS for the record.

7 46. The premium or discount for the difference between a delivery at a Reference Delivery Warehouse and Non-reference Delivery Warehouse shall be prescribed by the Exchange separately and submitted to CSRC for the record. 47. The term Opening Price means the transaction price resulted from a centralized competing process within the first five minutes immediately precede the opening of the market. If no transaction price occurred during the centralized competing process, the price of the first transaction immediately after the centralized competing process shall be the opening price. 48. The term Closing Price means the last transaction price of a futures contract on a trading day. 49. The term Settlement Price is the average transaction price of a futures contract on a trading day weighted by its trading volume. If there is no trade of a contract on a trading day, the settlement price of the contract on the last trading day before that day shall be the settlement price of that day. 50. The benchmark price of a new listed contract shall be set forth by the Exchange. 51. The member who exercises a futures transaction on the Exchange shall pay the Exchange a transaction fee pursuant to applicable rules. 52. The member who physically delivers a commodity shall pay the Exchange a delivery fee pursuant to applicable rules. The Exchange shall set forth delivery fee standards. 53. Daily price limit levels shall be in effect at the Exchange. Under the condition that within the five minutes preceding the closing of the market, only bids (offers) for a futures contract that the bids have reached the high (low) level of the price limit set forth for that contact but no offers (bids), or that within the five minutes preceding the closing of the market, transactions have been completed immediately after offers (bids) had been initiated so that the price has not moved away from the level set forth as the limit of a futures contract, the Exchange shall declare that it is at price limit level of the contract at the closing of the trading day and take appropriate actions in accordance with the Exchange s applicable rules. 54. The Exchange has implemented Margin Requirement System. Margin is the funds

8 that the trading party is required to deposit in accordance with applicable rules to ensure the performance of clearing and the fulfillment of contract obligations. 55. Margin may be classified as Settlement Reserve Fund and Trading Margin. The term Settlement Reserve Fund means the funds deposited by members in the special clearing account ahead of the transaction, which is not occupied by contracts. The minimum balance of Settlement Reserve Fund shall be determined by the Exchange. The term Trading Margin means the funds deposited by members in the special clearing account to ensure the performance of the contracts, which is occupied by the contracts. After a deal is done, a certain percentage of the contract value shall be deposited as Trading Margin. The level of Trading Margin may be adjusted by the Exchange, on which detailed regulations are made separately. 56. The member shall open a special fund account in a Settlement Bank designated by the Exchange to deposit such special fund that shall only be used for settling transactions related to futures business between the member and its customers and between the member and the Exchange. 57. The Brokerage Member shall deposit the margin obtained from customer in the special fund account for prompt margin payment and prompt payment for other related costs. Diverting customers funds to other purpose is strictly prohibited. 58. In accordance with CSRC s regulations, with a prior approval from the Exchange, Standard Warrant or other collaterals acceptable to the Exchange may be used as Trading Margin. 59. Upon receiving of a customer s order, a Brokerage Member shall promptly enter the order into the computer terminal on the trading seat for competitive trading. 60. The Exchange s Automatic Matching System shall process reported buying and selling orders on the principles of that price has priority and that time has priority. When the buying price is higher than or equal to the selling price, the orders are automatically matched and the transaction is complete. The matched transaction price shall be equal to the middle price of the buying price (bp), selling price (sp) and the last transaction price (cp). The formula is:

9 If bp sp cp, then the new transaction price = sp; If bp cp sp, then the new transaction price = cp; If cp bp sp, then the new transaction price = bp. 61. No order shall be accepted by the Exchange s trading system if the Settlement Reserve Fund is below the minimum requirement. 62. The transaction shall become valid as soon as the order to buy and the order to sell have been matched by the computing system. The Trading Reporting System shall send the information back to the member s computer network terminal. Upon receipt of the information, the member shall promptly report the completion of transaction to the customer. 63. If an order has been filled partially, the rest portion of the order shall remain in the Exchange s main system and stay in the price competition. 64. At the end of a trading day, the member may obtain transaction reports through the Exchange s Member Service system. The member shall inspect and check the transaction reports promptly. Any question regarding to the reports shall be submitted to the Exchange in writing on the same day. 65. The Exchange shall keep trading, settlement and clearing data for no less than twenty years. A Brokerage Member shall keep its customers account applications along with related materials, order records, trading and settlement records and other business records for no less than five years. 66. A Hedging Position Approving System shall be in effect at the Exchange. The Exchange shall inspect such data that may demonstrate an applicant s operations in cash market such as its business, performances in previous years and existing contracts of buying and selling cash commodities before determine the allowance of hedging positions for the applicant. A customer who applies for allowance of hedging positions shall apply through a Brokerage Member. 67. The allowance of hedging positions shall be deployed pursuant to the Exchange s applicable rules and regulations.

10 Chapter 6 Risk Management 68. The Exchange shall impose Position Limits on the positions established for purpose of speculation but not on positions established for purpose of hedging. It is so prescribed that on contracts of ordinary months and the month preceding the delivery month position limits shall be dually imposed by code of members and investors. Position limits on a Brokerage Member shall be determined by the Exchange in accordance with its registered capitals, credibility, capacity of averting risks, trading statistics in previous years and the certified number of its clients. On contracts of the delivery month position limits shall be imposed based on absolute value for both members and investors. If an investor has more than one account with different Brokerage Members, his positions shall be combined for consideration. Stipulations of implementation shall be prescribed separately. 69. The Exchange implements Mandatory Position Liquidation System. Under the condition that a member or investor is holding more positions than the rules permit, that he has not promptly satisfied the margin requirement with additional funds or that he has committed other violations, the Exchange shall force such member or investor to liquate his positions. Stipulation of implementation shall be prescribed separately. 70. Profits resulted from mandatory position liquidation shall be dealt with in accordance with applicable rules. The violator shall be responsible for all costs or losses if so occurred. The violator shall also be responsible for the extended losses if the mandatory position liquidation can not be executed due to the condition of the market. 71. Under the condition that the prices of a futures contract have reached the daily price limit continuously in the same direction, or that the risk the marketplace has been encountering has been significantly increased, the Exchange may take such actions as adjusting the daily price limits, increasing margin requirement and enforce position reduction in accordance with certain principles. If the market risk is still at high stake after the Exchange has taken these actions in controlling the risk, the Exchange may declare emergency of abnormalities, and the Board shall determine the

11 further steps the Exchange shall take to manage the risk. 72. In the case that a member is unable to fulfill its contract obligations, the Exchange shall have the authority to take such actions as: to suspend the member s right of building new positions; to force the member to liquate its positions pursuant to applicable rules, and use the margin fund released from the mandatory liquidation to fulfill its contract obligations and compensate for the losses; to dispose the member s collaterals in accordance with applicable laws; to use the funds obtained from transferring the member s membership and other assets to fulfill its contract obligations and compensate for the losses; to pursue to the member after the Exchange has fulfilled contract obligations on the member s behalf. 73. The Exchange shall install a Large Trader Report System. The member or investor shall report to the Exchange about his assets and positions if the number of his positions in a certain futures contracts has reached or exceeded 80% of position limit set forth by the Exchange. The investor shall report via a Brokerage Member. The Exchange may adjust the reporting level in accordance with the level of potential risks in the market. The Large Trader Report shall include but not limited to the following items: the name, address and business of the member or investor; the direction, commodity, contract month and quantity of the positions; the intention of holding the positions; sources of financing and the capability of satisfying additional margin request; the actual abilities of delivering or taking deliveries of the underlying product; other items required by the Exchange to report. 74. For purpose of preventing further consequence of a violation, the Exchange may take such provisional sanctions as described below if there has been evidence that a member or investor s violation of the Exchange s trading rules has been having or would have a major impact on the market: to impose limitations on the input of new funds;

12 74.2. to impose limitations on the withdraw of funds; to impose limitations on the opening of new positions; to increase the margin requirement; 74.5.to set a date for closing out the positions; 74.6.to implement mandatory position liquidation. Of the above, the provisional sanctions 74.1, 74.2 and 74.3 may be decided by the General Manager of the Exchange. Other provisional sanctions shall be decided by the Board and be promptly reported to CSRC. Chapter 7 Settlement 75. The Exchange has implemented Daily Settlement Without Indebtedness System. 76. At the end of a trading day, the Exchange shall calculate profits and losses, Trading Margins, taxes and trading commissions of every member to balance their accounts. The member may get settlement data through the member service system. 77. The profit or loss of that day shall be the net profit or loss of liquidated positions and open interest combined. 78. Additional margin shall be obtained if the balance of a member s margin account is below the minimum amount required by the Exchange for Settlement Reserve Fund. 79. The member shall maintain Settlement Reserve Fund at the required minimum level before the opening of next trading day. The member shall not be allowed to open any new position if its Settlement Reserve Fund is zero or less than the minimum requirement. The Exchange shall force a member to liquate its positions if its Settlement Reserve Fund is below zero. 80. The Brokerage Member shall make detailed records of its trading business, make chronological records of each customer s position building, position liquidations, open interest and deliveries in buying and selling futures contracts, accurately and promptly reflect the customer s financial situations such as profits and losses, costs and assets, debts and payments, and control the customer s trading risks. 81. The member shall properly keep settlement data, receipts and accounting books

13 for future inquiries and auditing. The pertinent files and documents shall be remained for no less than five years. 82. The Exchange shall collect, manage and utilize its Risk Reserve Fund. The Risk Reserve Fund shall be used to provide financial guarantee for ensuring normal operation of the futures market and make up the losses resulted from the risks that the Exchange should not be able to foresee. Chapter 8 Delivery 83. The terms physical delivery means the processes in which two trading parties close out an outstanding contract by transferring the ownership of the commodity obligated by the contract in accordance with conditions specified in the contract and regulations prescribed by rules. 84. Every outstanding contract that has not been closed out on the last trading day shall have its underlying commodity delivered and accepted. The delivery against the mature contract shall only be made or accepted in the name of the member. The investor shall make or accept delivery through a member. 85. The Exchange shall use a computerized system to match open contracts for delivery assignments through the method of Least Matched Pairs. 86. The member who is involved in a physical delivery shall submit either the cash payment for the underlying commodity or the document for the ownership of the commodity that is ready to deliver within the timeframe defined by the Exchange. 87. Within the timeframe defined by the Exchange, the seller shall submit Standard Warrant and special Value-Added-Tax Receipt that corresponds to the sale, the Exchange shall then turn the payment for the commodity to the member who is the seller; after the buyer has submitted the full payment for the commodity, the Exchange shall turn the Standard Warrant to the member who is the buyer, one hand-over after one take-in, first receiving and then delivering. 88. Having receiving the Standard Warrant from a seller or the full payment from a buyer, the Exchange shall transfer the margin that shall be returned to the account of the seller or the buyer.

14 89. The buying member who is not satisfied with the commodity delivered during the delivering process may submit an application for re-examination within the timeframe prescribed by the Exchange. 90. The delivery settlement price of a futures contract is the basis price for delivery settlement. 91. No commodity for deliver shall be admitted into a warehouse unless it has been reported prior to the delivery through proper procedures. The Exchange shall arrange and assign Delivery Warehouses on the principle of best distribution and overall consideration. 92. The term Standard Warrant means the certificate that guarantees the existence and availability of a given quantity and quality of a commodity for physical delivery. It is formulated by the Exchange centrally and issued by a Delivery Warehouse designated by the Exchange to the owner of commodity upon completion of load-in process and affirmation of the quality. No Standard Warrant shall be used for delivery unless it has been registered with the Exchange. 93. The term Designated Delivery Warehouse means a delivery point designated by the Exchange for executing the physical delivery of a futures contract. The Exchange shall inspect each Designated Delivery Warehouse on a annul basis. 94. The Designated Delivery Warehouse may set up an office at the place where the Exchange locates and deal with delivery affairs with the overall coordination supported by the Exchange. 95. If a Designated Delivery Warehouse is in one of the violations as described below, the Exchange shall have the authority to order it to correct its misdemeanor and demand compensations for associated financial damages. If the offense is serious, the Exchange shall disqualify the warehouse in respect thereof as a Designated Delivery Warehouse and may pursue the matter in a court for the liability: having issued false Standard Warrant; having violated the Exchange s business regulations and obstructed transporting a commodity for delivery into or out of the warehouse; having divulged confidential business information related to futures trading;

15 95.4. having participated in futures trading; other misdemeanors that have violated pertinent rules set forth by the Exchange. 96. During the process of delivering a physical commodity, if the Standard Warrant submitted by a seller do not satisfied the quantity specified by the futures contract or the payment submitted by a buyer is not adequate to pay the delivered commodity by a specified time, it shall be considered a breach of contract. 97. If a member has broken a futures contract in the process of physical delivery, the Exchange may carry out a public bid or auction to deal with the breach of contract. The defaulting member shall be responsible for costs and damages incurring in the public bid or auction. The Exchange may also order the defaulting member to pay penalties and compensations as a measure of disciplinary action. Exercising such authority shall be in accordance with applicable rules regarding to handling breaches of contracts in physical delivery prescribed by the Exchange. 98. The member shall not be permitted to evade the responsibility of delivering the commodity specified in a futures contract for the reason that the investor has breached the contract. The Exchange shall have the authority to force the member in respect thereof to fulfill the contracted responsibility. 99. If the holder of a Standard Warrant cannot partially or fully carry out the rights granted to him by the Standard Warrant due to a fault committed by the Designated Delivery Warehouse, the warehouse thereof shall assume the obligation to compensate for the damage. If the compensation thereof is deficient, the Exchange shall pay for the rest portion in accordance with applicable rules, and pursue the warehouse thereof for reparations. Chapter 9 Dealing with Abnormalities 100. If one of more situations described below have occurred during a trading day, the Exchange may declare emergency of abnormalities and take extraordinary steps to avert dangers and risks: when the Exchange is unable to conduct normal operation due to such unmanageable forces as earthquake, fire or flood, or to failures of computing systems

16 for reasons that cannot be controlled by the Exchange; when the members are experiencing settlement or delivery crisis that is having or will have significant impact on the market; when the situation described in Article 71 has occurred and the market risk still persists after appropriate actions have been taken; other situations defined by the Exchange. In the abnormal situation 100.1, the General Manager of the Exchange may take such emergency actions as adjusting the opening time and/or closing time and suspending trading. In the abnormal situations 100.2, and 100.4, the Board may determine to adopt such actions as adjusting the opening time and/or closing time, suspending trading, adjusting daily price limits, increasing margin requirement, set a date for closing out the positions, mandatory position liquidation, and limiting withdrawing funds Before declaring an abnormal situation and making decision to take emergency actions, the Exchange shall report such actions to CSRC With the exception that CSRC has given its permission for a prolonged period, the suspension of trading for an abnormal situation shall not exceed three trading days. Chapter 10 Information Management 103. The Exchange shall disseminate such trading-related information such as trading prices of that trading day and necessary statistics, etc The information disseminated by the Exchange shall include commodity name, contracted delivery month, opening price, latest price, price range, closing price, the highest, the lowest, contract volume, open interest and the change of open interest, ranks of trading volume and open interest by members, and the storage capacity certified by the Exchange for the use of delivery, the quantity and the change of quantity of Standard Warrants of each Designated Delivery Warehouse, as well as other information that needs to be disseminated. According to the content, information shall be disseminated on daily, weekly,

17 monthly and annually bases The Exchange shall adopt efficient and effective communicative means and built a real-time price quote system and an instantaneous transaction reporting system If the Exchange has properly and promptly disseminated trading information but the information has failed to reach the public due to malfunction of the public media and the failure of communication has had impact on members and investors trading activities, the Exchange shall not be held responsible The Exchange, members and Designated Delivery Warehouse are strictly prohibited from disseminating any false or misleading information The Exchange, members, Designated Delivery Warehouse and Designated Settlement Banks are strictly prohibited from divulging any confidential information acquired from their businesses. With appropriate approvals, the Exchange may provide relevant information to the regulatory bodies and/or other pertinent parties and abide by applicable confidentiality rules 109. The Exchange shall establish a backup copy of its data at a different location to ensure the safety of trading data. Chapter 11 Surveillance and Regulation 110. The Exchange shall regulate and supervise futures trading activities on and related to the Exchange pursuant to the Trading Rules and the related stipulations The main contents of supervision conducted by the Exchange include: to supervise and inspect implementations of policies, regulations and trading rules applicable to the futures market, and control market risks; to supervise and inspect business conducts and internal managements of every members; to supervise and inspect financial conditions and integrities of every members; to supervise and inspect business activities relevant to futures trading of every Designated Delivery Warehouse and Designated Settlement Banks; to negotiate and arbitrate disputes involved in futures trading, investigate and

18 take actions in occasions where violations have occurred; to assist judicial and administrative authorities to carry out their lawful responsibilities; to monitor and take action against any behavior that has violated the principles of openness, fairness and equitability and is a threat to the normality of market operation The Exchange shall review compliances to the Exchange s business regulations of part or all of its members annually and submit a review report to CSRC Upon discovery of a violation, the Exchange shall establish a case and start to investigate immediately The Exchange shall have the authority to investigate and take evidences pursuant to applicable regulations while carrying out its supervising and regulating responsibilities. The member shall cooperate The member, investor, Designated Delivery Warehouse and Designated Settlement Bank shall accept the Exchange s surveillance and regulation over their futures trading activities. The Exchange shall take necessary sanctions and disciplinary actions against a party in accordance with applicable rules, if the party s behaviors have obstructed Exchange employees from carrying out their duties by refusing to cooperate, falsifying data, withholding the truth and/or intentionally avoiding the employees contacts For purpose of preventing a violation having further impact on the market, the Exchange may take appropriate actions against the member, investor, Designated Delivery Warehouse or Designated Settlement Bank that has seriously violated rules and regulations while conducting business relevant to futures trading and been listed in the case established by the Exchange to investigate the violation Provided that it is authorized by the Board of Directors, a Special Investigation Committee may be installed that consists of member representatives, employees of the Exchange and other relevant parties to investigate a major event that has occurred in futures trading. During its tenure, the Special Investigation Committee assumes the supervising and regulating authority empowered by the Trading Rules. During the

19 investigation period, the withdrawal system should be adopted The member, investor, Designated Delivery Warehouse or Designated Settlement Bank shall have the right to file a complaint or report to the Exchange or CSRC if employees of the Exchange have not been able to perform the supervising and regulating functions properly. If the negligence of duty has been verified, the Exchange shall enforce stern discipline The Exchange shall prescribe certain measures to penalize behaviors that have violated rules and regulations. Chapter12 Disputes procedure 120. Any dispute, claim or controversy between parties who are members, investors, Designated Delivery Warehouse, Designated Settlement Bank, that arises out of futures trading business may be resolved through negotiation among interested parties, or submitted to the Exchange for arbitration The parties that submit a dispute to the Exchange for arbitration shall submit written application. The solution to the submitted dispute proposed by the Exchange shall be confirmed by the parties involved with official seals before going into effect The parties involved in a dispute may also submit the matter to an arbitration organization for arbitration or to People s Court for a judicial judgment. Chapter 13 Supplements 123. The Exchange may make relevant detailed rules in accordance with the Trading Rules The interpretative right of the Trading Rules belongs to the Board of Directors of Dalian Commodity Exchange The establishment of and amendments to the Trading Rules shall be adopted by the Member Meeting and subject to the approval of CSRC The Trading Rules shall be effective as of February 1, 2004.