Appendix 3
Trading Rules ofthe Shanghai International Energy Exchange
Table of Contents
Chapter 1 General Provisions
Chapter 2 Trading Seats Management
Chapter 3 Price and Filling of Orders
Chapter 4 Trading Code
Chapter 5 Hedge Trading
Chapter 6 Arbitrage Trading
Chapter 7 Hedge Trading and Arbitrage Trading of Crude Oil Futures Contracts
Chapter 8 Miscellaneous
Chapter 1 General Provisions
Article 1TheseTrading Rules of the Shanghai International Energy Exchange(hereinafter referred to as the “Trading Rules”) are formulatedpursuant to the General Exchange Rules of the Shanghai International Energy Exchange,in order to regulate the futures trading activities, protect the legitimate rights and interests of all parties infutures trading, and maintainthe ordersof futures tradingatthe Shanghai International Energy Exchange (hereinafter referred to as the “Exchange”).
Article 2These Trading Rules are binding on the Exchange andits Members, Overseas Special Participants (hereinafter referred to as the “OSPs”), Overseas Intermediaries and Clients.
Chapter 2 Trading Seats Management
Article 3A“trading seat”refers to the access through which a Member or an OSPplaces orders for execution into the Exchange’s electronic trading system formatching.
Multiple computer terminals can be connected to one trading seat through a server.
Article 4AMember oran OSP may apply to the Exchange for the corresponding numbersof trading seats according to itsbusiness needs.
Article 5A Member or an OSP applying for a trading seat shall meet the following criteria:
1.satisfying the requirementsof trading volume and capitalset forth by the Exchange;
2.having necessarytelecommunicationfacilities and funds transfer conditions atthe proposed remote tradingpremises in compliance withthe Exchange’soperational requirements for futures trading;
3.being equipped witha stable and reliable computer system with backup systems,a telecommunication system (includingtelecommunicationroute), andappropriate telecommunication experts;
4.havingsound internal rules and remote trading management measures;and
5.operating in good condition and havingno record of default or severe rule violations.
Article 6A Member or an OSP applying for atrading seat shall submit the following materials to the Exchange:
1.reportsdescribingthe reasons, its facilities, a feasibility studyand any other relevant information for applying for the trading seat;
2.an organizational chart and a profile of its personnel, including a list of the executives to be in charge of trading activities, their resumes and expertise;
3.descriptions of the policies and procedures put in place relating to trading activities as required by the Exchange, including data security managementrules;
4.a configuration list outlining computer systems, telecommunication systems, system software, application software and any otherrelevant information; and
5.other materials as prescribed by the Exchange.
Article 7The Exchangeshall respond to the application in writing within ten (10) trading days as of receiving the complete application materials conforming tothe requirements. If the application is approved, the Exchange shallfile a notice of such approval in writing to the applicantand have the application premisesof the trading seat registered. If the application is not approved, the Exchange shall inform the applicant in writing.
Article 8After receiving the notice of approval, aMember or anOSP shall presentanundertakingletter of usingthe trading seats to the Exchange within ten (10) trading days. Failure to present such undertaking letter without justificationwithin the prescribed time period shall be deemed a waiver by theMember or the OSP.
Article 9Members and OSPsshall complete the trading facilities installation and system testing, and engage inthe overalltesting and simulation operation organized by the Exchange. A trading seat shall not be put into use until all the necessary requirements for the trading facilities installation and system testing are satisfied.
Article 10For the trading seats granted, the applicant shall pay the trading seatsfeeannually.Trading seats fee collected shall not be refunded foranytrading seatcancelled.
The trading seats fee standards shall be prescribedbythe Exchangeseparately.
Article 11The Members and the OSPsshallimprovethe management of trading seats and the maintenance of trading system.
Article 12The Exchangeretains the right to supervise and inspect the use of trading seats.
A Member or an OSP shall obtainthe prior approval of the Exchange to replace or modify its major trading facilities and software,and to removethe trading seats fromthe original registeredpremises.
Article 13Permission to use a trading seat shall be withdrawn under any of the following circumstances:
1.a Member or an OSP applies to withdraw the trading seat and obtains the Exchange’s approval;
2.a Member or an OSPsubcontracts, subleasesor transfersthe trading seat without the approval ofthe Exchange;
3.a Member or an OSPobtains confidentialinformation through the trading system, or disruptsthe trading system;
4.a Member or an OSP fails to manage its trading seat(s) in a proper way,andis deemed ineligible to continue operating the trading seat(s);
5.disqualification of aMember or anOSP;
6.aMember or an OSPhas serious rule violations;
7.other circumstances prescribed bythe Exchange.
Chapter 3 Price and Filling of Orders
Article 14The Exchange shall timely publishthemarket data including the opening price, closingprice, the highest price, the lowest price, the latest price, price change, the highest bid, the lowest ask, bid volume, ask volume, settlement price, trading volume, open interestand other information regarding futures trading.
Article 15The type oftradingorderincludesprice limit order, “fill-and-kill” order (FAK order), “fill-or-kill” order (FOK order) and other types as prescribed by the Exchange.
Article 16Atrading order on a futures contract shall only be quotedwithin the range of the price limitsfor the contract.
A maximum of five hundred(500) lots and a minimum of one (1) lot may be executed in each order,unless otherwise prescribed bythe Exchange.
Article 17Program trading shall be filed in advance withthe Exchange.
If the trading orders placed byMembers, OSPs, Overseas Intermediaries and Clients engaging inprogram trading may influence the safety of the Exchange’s system or disrupt the normal order of futures trading, the Exchange may adopt relevant restrictive measures.
Article 18Trading hours of a futures contract on each trading day shall be managed by sessions, and announced by the Exchangeseparatelywhen such contract is listed.
Article 19The beginning and the end of the central auction sessionis automatically dictated bythe Exchange’s trading system, and displayed on the computer terminals.
The central auctionsession is a five (5)-minute sessionprior to the market opening on each trading day.Bids and asks are entered into the central order book during the first four (4) minutes, and are matchedduring the last minute.
The trading price of a contract generated thoughthe central auctionis the open price. Ifa trading price is not generated from the central auction, the price of the first trade executedfollowing the central auctionsession shallbe the open price. The price of the first trade is calculated according toArticle 21 of these Trading Rules,where the price of the previous trade executed is the close price ofthe last trading day.
Article 20The central auction session applies“trade maximization” to the orders to be filled. The price established during the central auction session shall match the most bids and asks.Bids higher than or asks lower than the price generated fromthe central auction shall all be executed.Bids or asks at the price generated fromthe central auction shall be executed up to the number of bids or asks, whichever is less.
In continuous trading session, the Exchange’s trading system will automaticallymatch the bids and asksin order of price and time priority.
Under the circumstance wherethe price limit is reached, the matching is in order ofclosingposition and time priority.Closing position priority is not applicable to the close of the positions opened ofthe day.
Article 21The new trading priceis the pricestanding in the middle among the bidprice (bp), the askprice (sp) and the price of the previous trade executed (cp), as follows:
bp≥sp≥cp, the currenttrading price =sp;
bp≥cp≥sp, the currenttrading price = cp; or
cp≥bp≥sp, the currenttrading price = bp
The bid and askmatched through the trading systemconstitutea valid transaction, and the data thereof shall be sent through the Exchange’s trading system to the Membersor/and the OSPs. The Members and the Overseas Special Brokerage Participants (hereinafter referred to as the “OSBP”) shall, upon the receipt of the transaction data, instantly notify the Clients of the completed transaction.
Article 22The unfilled ordersduringthe central auctionsession shall remain active for automatic matching in the trading session. The orderswill stayvalid for the whole trading dayuntil they are filled or cancelled.
Article 23Atthe close ofeachtrading day, Members and OSPsshall check the trading recordsthroughthe member service system of the Exchange, andshall promptly verify such records.
Should any dispute over the accuracy of the records arises,a Member oran OSPshall submit a notice in writing to the Exchangeno less than thirty(30) minutes prior tothe market opening of the next trading day.In case of an emergency, a notice in writing shall be submitted to the Exchange within two (2) hours after the market opening of the next trading day.The Exchange will promptly deal with the dispute and provide feedbacks thereof.
If aMember oran OSPdoesnot raise any objections within the specified time, it shall beregarded that theMember or the OSP has acknowledged the trading records.
Article 24The Exchange for Physical (the “EFP”) isapplicable to the previous openpositions of all listed futures contracts of the Exchange, but not applicable to the new positions opened on the application day.
Article 25The Exchange shall, before 15:00 of the application day, close the positions of the corresponding futures contract of the delivery month held by the buyer and the seller tendering the EFP, at the settlement price of the trading day immediately before the application dayfor the corresponding contract of the delivery month.
Article 26 The listingprice for a new contract is determined by the Exchangeand shall be released in advance of the first day of trading. The price limit for such contract on its first trading dayshall be determined on the basis of the listing price.
Article 27The price limit for a new contract on itsfirst tradingdayshall betwice the price limitstipulated by the contract specifications.
If trades are executed on the first trading day, the price limitshallrevert to its regular price limit as set forth in the contract specifications and the settlement price on the first trading day shall be determined pursuant to the provisions provided in the Clearing Rules of the Shanghai International Energy Exchange.
If there is no trade executedon the first trading day, the price limit of the next trading dayshall remain twice the price limitstipulated by the contract specifications, andthe settlement price on the first trading day shall be determined pursuant to the provisions provided in the Clearing Rules of the Shanghai International Energy Exchange. When applying such provisions, the listingprice of anew contract on the first tradingday shall be deemed as the settlement price of the previous trading day ofsuch a contract.
Article 28If more than 10% oftrading seatswith valid connectionscannot book deals due to the malfunction oftrading systems andcommunication systems, etc.,, the Exchange shall suspend the tradinguntil the malfunction isrectified.
The number of trading seats that cannot book deals shall be calculated by using the maximum number of trading seats with valid connections within the half hour after the market opening of the previous trading dayminus the number of current connected trading seats.The number of trading seats with valid connections refers to the maximum number of trading seats with valid connections within the half hour after the market opening of the previous trading day.
Article 29The Exchange may adjust the time of opening and closing for the continuous trading session, or suspend it if, before the opening of the continuous trading session, abnormal circumstances are reported through the memberservice system,more than 30% of Members and OSPsregistered to participate in continuous tradingfail to complete clearing or the initialization of thetrading system, or in other situations as deemednecessary by the Exchange.
Chapter 4 Trading Code
Article 30The Exchangeshall implement the trading code.
Trading codes are classified intotrading codesfor Non-Futures Firm Members (hereinafter referred to as the “Non-FF Members”), trading code forOverseas Special Non-BrokerageParticipants (hereinafter referred to as the“OSNBP”) andtrading code forClients,unless otherwise prescribed by the Exchange.
Each Clientmay open trading accounts with different Futures Firm Members (hereinafter referred to as the “FF Members”),OSBPs,Overseas Intermediaries or other institutions(hereinafter collectively referred to asthe “account opening institutions”).Account opening institutionsare not allowed to aggregate or netmulti-Clients’ positions.
Article 31Account opening institutionsshall conduct trading codeapplication and other account openingformalitiesfor Clientsin accordance withthe relevant rules of the China Securities Regulatory Commission (hereinafter referred to as the “CSRC”), the China Futures MarketMonitoring Center (hereinafter referred to as the “CFMMC”) and the Exchange.
Securities companies, fund management companies, trust companies, banks and other financial institutions,social security companies and other special institutional clients who manage assets under segregated accountsmay apply for atrading code in accordance with the relevant rules of the CFMMCpursuant to the laws, regulations, rules and other relevant provisions.
Article 32An account opening institutionshall sign afutures brokerage contract with each of its Clients. Clientsmayplacetrading orderswith clear instructions and complete information throughwritten authorization, telephone, internet or anyother meansprescribed by theCSRC.
Article 33After receiving the account opening application materials of a Clientforwarded by the CFMMC, the Exchangeshall allocate, assign and manage the Client’strading code, and report the processing results to the account opening institutionvia the CFMMC.
After receiving the account opening application materials of aNon-FF Memberand/or anOSNBP, the Exchange shall allocate, assign and manage the trading code ofthe Non-FF Memberand/or theOSNBP,and report to them the processing results, respectively.
Article 34The trading account shall not be opened during continuous tradinghours.
Article 35The Exchange may revokethe trading code of a Non-FF Member, an OSNBP or a Client if any of the following condition occurs:
1.materials presented are false;
2.anFF Memberor anOSBPapplies for cancellation of trading codesof its clients and there areno openpositions under such trading codes;
3.aNon-FF Memberor anOSNBPapplies for cancellation of its trading code, and there areno openpositions under such trading code;
4.beimposed a ban for participating in a securities market orfutures market by the CSRC;
5.be declared as “persona non grata to the market” by the Exchange;
6.other circumstancesprescribed by the Exchange.
Article 36An account opening institution may be required by the Exchange to liquidate the positions within a specified time period if its Clients, or it assists its Clients to,submit false materials as part of the account opening and trading code application. A Non-FF Memberor an OSNBP may be required by the Exchange to liquidate the positions within a specified time period,if itsubmitsfalse materials foraccount opening and trading code application. The trading codeshall be cancelled following the liquidation of the positions, and additional sanctions shall be imposedin accordance with the Enforcement Rules of the Shanghai International Energy Exchange.
Chapter 5 Hedge Trading
Article 37Hedge trading quota isclassified into hedge trading position quota forregular months (hereinafter referred to as the “hedging quota forregular months”) and hedge trading position quota for nearby delivery months (hereinafter referred to as the “hedging quota fornearby delivery months”). Hedging quota forregular monthsis classified into long hedging quota forregular monthsand short hedging quota forregular months. Hedging quota fornearby delivery monthsis classified into long hedging quota fornearby delivery monthsand short hedging quota fornearby delivery months.
The regular months and nearby delivery months of a futures contract, as well as its quota application time are prescribed in the chapter of theseTrading Rules regarding futures contracts of the listed product.
Article 38Hedging quota forregular monthsand hedging quota fornearby delivery monthsof each contract of the listed products shall be approved by the Exchange.
Clients shall apply to their account opening institutionsfor the hedging quota,and the account opening institutionsshall apply to the Exchange after verification in accordance with relevant provisions. Non-FF Membersand OSNBPsshall directly apply to the Exchange for the hedging quota.
Article 39A Non-FF Member, an OSNBP or a Clientshall provide the following materials to apply for the hedging quota forregular months in accordance with the contract:
1.an Application (Approval) Form of Hedging Quota forRegularMonths, including applicant’s basic information, contracts applied, hedging quota applied forregular months and other information;
2.acopy of the business license,a certificate of incorporation, or other documents which may prove the applicant’s business scope;
3.business performance ofphysical commoditiesinthe previous year or the latest audited annual financial report;
4.abusiness planof physical commoditiesforthe current year or the followingyear,and any purchase and sale contracts or other valid certificates related to the application for hedging;
5.ahedging strategy, including analyses of the source of risksand hedging objectives;
6.hedging management rules, if the applicant is a Non-FF Memberor an OSNBP;
7.other materials required by the Exchange.
ANon-FF Member,an OSNBP or a Client may apply for hedging quota forregular months for multiple contracts once at a time.
Article 40The Exchange shall approvethe hedging quota for regular months of an applicant based on whether or not, the subject is competent, the real hedging needs exist, and the hedgingproducts, the positions held, required trading volumes and the hedging period match the production and operation scale, historic operational conditions, financial conditions and other related factors. Hedging quotas for regular months shall not exceed the quota applied by the applicant.