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Chinese state-run companies have been authorsed by the China Securities Regulatory Commission (CSRC) to have hedge transactions at the Brazilian Mercantile & Futures Exchange (BM&F), given they report to CSRC for record, through member brokerage houses. BM&F also signed a memorandum of understanding with the Zhengzhou Commodity Exchange (ZCE).


The authorisation coincided with the first official Chinese futures market regulatory delegation visit to the Brazilian Mercantile & Futures Exchange headquarters in So Paulo in June.


The delegation’s objective was to examine the development of Brazil’s derivatives market and the technologies behind transaction procedures, netting and settlement of BM&F’s financial and agricultural futures and options contracts. The Chinese delegation also visited soybean production, commercialisation and export structure in the states of Mato Grosso and Paran During their mission, the group visited in addition Brazil’s Securities Exchange Commission (CVM), observing the regulatory and supervision environment of the Brazilian financial markets.


The delegation also took part in the memorandum of understanding agreement signing ceremony between BM&F and the ZCE. The agreement aims to promote the exchange of information, employee training, and to sponsor seminars together. BM&F has similar agreements with the Shanghai Futures Exchange and the Dalian Commodity Exchange.


The ZCE was founded in 1990 and is one of the three futures exchanges in the People’s Republic of China, remaining active and operational during the consolidation process of the country’s derivatives industry, when the Chinese government, in 1994, reorganised the country’s more than 50 futures exchanges.


The ZCE has 218 member brokerage houses and is an electronic market, where the client has access to the exchange’s trading systems. The contracts traded at the ZCE are: wheat (10 tons) and cotton (5 tons) futures with physical delivery. In 2004, ZCE had 25mn contracts traded and an open interest of 150,000 contracts; until the end of May 2005 12.5mn contracts were traded and an open interest of 180,000 contracts.