(Adopted at the 25th meeting of the 7th Board of Governors on July 29, 2022; issued by Announcement [2022] No. 74 on August 31, 2022; effective as of December 1, 2022)

 

Chapter 1    General Provisions

Article 1          These Rules are made in accordance with the Trading Rules of Zhengzhou Commodity Exchange (“Trading Rules”) and other relevant rules for the purposes of strengthening the management of the designated commodity factory warehouses of the Zhengzhou Commodity Exchange (the “Exchange”), regulating physical delivery activities, and ensuring smooth delivery processes.

Article 2          “Designated commodity factory warehouse” (“factory warehouse”) refers to an enterprise legal entity that produces, trades, or otherwise deals in commodities designated by the Exchange and is certified by the Exchange to provide commodity and related services in the physical delivery against commodity futures contracts.

Article 3          The Exchange administers factory warehouses in accordance with these Rules. Factory warehouses and their relevant staff members shall comply with these Rules.

Chapter 2    Application and Approval

Article 4          An applicant for becoming a factory warehouse shall:

(1)        possess a Business License issued by the administrative department of the People’s Republic of China (“PRC”) for industry and commerce which lists the production or trading of the relevant commodities in the scope of business;

(2)        have reached the level of net capital and registered capital required by the Exchange;

(3)        have reached the production or trade volume specified by the Exchange;

(4)        be financially sound and resilient;

(5)        have a good business reputation and well-developed management rules, and have no record of any major violation of the law;

(6)        acknowledge and abide by the Bylaws of Zhengzhou Commodity Exchange, Trading Rules, Futures Delivery Rules of Zhengzhou Commodity Exchange (“Delivery Rules”), Rules of Zhengzhou Commodity Exchange on Standard Warehouse Receipts (“Standard Warehouse Receipt Rules”), and the product-specific rules of the Exchange;

(7)        possess the storage conditions for the relevant deliverables, well-functioning equipment, and compliant measurement apparatus;

(8)        have established the protocols needed for the management, inspection, and testing of the relevant deliverables;

(9)        be conveniently located with a high loading/unloading and shipping capacity; and

(10)      meet any other requirements specified by the Exchange.

Article 5          An applicant for becoming a factory warehouse shall submit the following documents:

(1)        the application form;

(2)        a photocopy of the Business License issued by the administrative department of the PRC for industry and commerce;

(3)        audit reports of the most recent two (2) years issued by an accounting firm or the annual financial statements audited by a government body recognized by the Exchange;

(4)        approval of the application’s submission issued by the applicant’s supervising body or board of directors;

(5)        security documents required by the Exchange;

(6)        statement on its monthly and annual production or trade volume and monthly load-out volume in the most recent three (3) years;

(7)        statement on the quality, destination, and quantity of its products in the most recent three (3) years;

(8)        lease agreement between the applicant and the owner of the relevant premises, for any applicant that is approved by the Exchange for operating with leased premises;

(9)        management protocols for such areas as the production, inspection, and load-out of commodities;

(10)      statement on the use of bank guarantees in the most recent three (3) years; and

(11)      any other documents required by the Exchange.

The Exchange may adjust the requirements for the application materials based on the circumstances of the applicant.

Article 6          The Exchange reviews each factory warehouse application in accordance with the following procedures:

(1)        conduct a preliminary review of the application materials listed in the preceding Article;

(2)        conduct on-site inspection and evaluation of the warehouse based on the results of the preliminary review; and

(3)        select the most qualified applicants based on the results of on-site inspection and evaluation and sign the factory warehouse agreement.

Article 7          An applicant shall complete the following procedures upon being approved as a factory warehouse:

(1)        file with the Exchange the seals that will be used for registering standard warehouse receipts;

(2)        appoint one person to oversee the futures delivery business, set up a delivery services department, assign dedicated persons to manage standard warehouse receipts, and file the relevant letters of authorization and the signature of the authorizer with the Exchange;

(3)        pay the delivery deposit;

(4)        develop operating procedures or detailed rules in accordance with the requirements of the Exchange and these Rules;

(5)        arrange the managerial staff for the futures delivery business to attend the delivery training organized by the Exchange; and

(6)        complete any other procedures specified by the Exchange.

Article 8          Any factory warehouse that wishes to relinquish its factory warehouse status shall submit a withdrawal application to, and obtain the written approval of, the Exchange.

Article 9          Any factory warehouse whose factory warehouse status is relinquished with the approval of the Exchange or is revoked shall complete the following procedures:

(1)        cancel all standard warehouse receipts and ship out all relevant commodities;

(2)        settle all claims and liabilities with the Exchange; and

(3)        settle all claims and liabilities with Members and clients.

The Exchange will return the delivery deposit in accordance with its rules once it has verified that the factory warehouse has duly completed the above procedures.

Article 10        The Exchange shall, upon the confirmation, cancellation, or approval of relinquishment of the factory warehouse status of a factory warehouse, notify Members and the factory warehouse in a timely manner.

Chapter 3    Rights and Obligations

Article 11        A factory warehouse has the right to:

(1)        request to register standard warehouse receipts in accordance with the rules of the Exchange;

(2)        charge such fees, at such rates, and in such manner as approved by the Exchange;

(3)        offer suggestions to the Exchange with regard to its rules on physical delivery;

(4)        designate pick-up points with the approval of the Exchange; and

(5)        exercise other rights provided in the Futures Delivery Rules, Standard Warehouse Receipt Rules, the various product-specific rules of the Exchange, and the factory warehouse agreement.

Article 12        A factory warehouse has the obligation to:

(1)        comply with the Futures Delivery Rules, Standard Warehouse Receipt Rules, product-specific rules, and other rules of the Exchange; accept the supervision of the Exchange; and provide relevant information to the Exchange in a timely manner;

(2)        provide deliverables in accordance with the requirements specified in the standard warehouse receipts and the Rules of the Exchange and actively assist the owners of the commodities during load-out process;

(3)        be fully accountable for the quality and quantity of the commodities;

(4)        maintain the confidentiality of all delivery-related confidential commercial information;

(5)        accept the annual reviews organized by the Exchange;

(6)        pay the delivery deposit;

(7)        cooperate with and supervise the Designated Quality Inspection Agencies during sampling procedures;

(8)        supervise and be fully accountable for the delivery activities at the designated pick-up points;

(9)        ensure that the commodities designated for futures delivery have priority in load-out;

(10)      promptly notify the Exchange in the event of any change in its name, legal representative, registered capital, shareholders or ownership structure, or warehouse premises; any event that may endanger the deliverables or any matter such as litigations; and any adjustment to its production line; and notify the Exchange before any major event such as the collateralization of the land or buildings of its warehouse or any guarantee to external parties;

(11)      timely provide the Exchange with such information about itself as the commodity price, production capacity, output, and inventory size in accordance with the request of the Exchange; and

(12)      perform other obligations provided or agreed in the Futures Delivery Rules, Standard Warehouse Receipt Rules, the various product-specific rules of the Exchange, and the factory warehouse agreement.

Chapter 4    Daily Operations

Article 13        The daily operations of a factory warehouse mainly consist of the management of deliverables and provision of delivery services.

Article 14        A factory warehouse shall maintain a certain level of stock for every type of deliverables during day-to-day business, the specific quantity of which is as determined by the Exchange.

Article 15        A factory warehouse shall conduct the weight and quality inspection of deliverables under the monitoring and with the cooperation of the commodity owner and ensure the deliverables meet the weight and quality requirements for delivery. Where on-site quality inspection is infeasible, the factory warehouse shall provide the corresponding certificate of quality.

Article 16        A factory warehouse shall process the load-out of commodities in a timely and careful manner and shall duly complete the following checks:

(1)        check whether the Pick-up Notice is valid; and

(2)        verify whether the information on the Pick-up Notice is fully consistent with fulfillment capacity committed by the factory warehouse.

If no issue is identified during these checks, the factory warehouse shall ship the deliverables without delay.

The factory warehouse shall provide timely updates to the Exchange on the shipping process, destination, and other relevant aspects of the deliverables. Upon the completion of shipping process, the factory warehouse shall report relevant load-out information to the Exchange as required.

Chapter 5    Supervision

Article 17        The Exchange conducts spot checks and annual reviews on factory warehouses, and may require a factory warehouse to conduct self-inspections.

Where any violation is identified during a self-inspection, spot check, or annual review, the Exchange may take such actions against the relevant factory warehouse as requiring rectifications or revoking its factory warehouse status; any resulting loss shall be borne by the factory warehouse.

Article 18        A factory warehouse is prohibited from:

(1)        influencing or attempting to influence the futures price in collusion with a Member or client by such methods as requesting for a large standard warehouse receipt quota without commensurate load-out activities;

(2)        overcharging for delivery services;

(3)        creating obstacles for clients or refusing to work with clients during the load-out of deliverables;

(4)        refusing or obstructing the lawful and compliant supervision and examination by the Exchange;

(5)        engaging in fraud which has affected the normal conduct of futures delivery activities; or

(6)        engaging in any other activity that violates the rules of the Exchange.

Article 19        Each factory warehouse shall pay a delivery deposit to the Exchange as a guarantee for its performance of the relevant obligations. The amount and payment method of the delivery deposit are as specified in the factory warehouse agreement. Interest on the delivery deposit is the property of the factory warehouse and is accrued annually at the bank current-deposit rate published by the People’s Bank of China for the corresponding period.

Article 20        Any factory warehouse that incurs losses to a client (or person taking delivery) for failing to deliver commodities meeting the load-out standards specified in the relevant contract shall be liable for compensation.

Chapter 6    Ancillary Provisions

Article 21        Any violation of these Rules will be handled in accordance with the Rules of Zhengzhou Commodity Exchange on Violations.

Article 22        The Exchange reserves the right to interpret these Rules.

Article 23        These Rules take effect on December 1, 2022.

 

 

(This English version is for reference ONLY. In case of any inconsistency between the different language versions, the Chinese version prevails.)