(Amended at the 12th meeting of the 6th Board of Governors on October 23, 2018; issued by Announcement [2018] No. 66 on November 9, 2018; effective as of November 9, 2018)

Chapter 1    General Provisions

Article 1          These Rules are made in accordance with the Trading Rules of Zhengzhou Commodity Exchange for the purposes of strengthening the administration of accounts linked by actual control relationship (“Actual Control Accounts”) at the Zhengzhou Commodity Exchange (the “Exchange”), maintaining an orderly market, and promoting a sound futures market.

Article 2          Each futures brokerage Member (“FB Member”) and overseas broker shall inform its clients of the obligation to file their Actual Control Accounts; duly supervise these accounts; record, archive, and properly store the documents related to the filing and management of these accounts, and keep the client filings confidential.

Article 3          Any non-futures brokerage Member (“Non-FB Member”) or client that engages in futures trading shall comply with laws, regulations, ministry-level rules, and the Rules of the Exchange and accept the Exchange’s oversight of its Actual Control Accounts. A client shall additionally accept the supervision of its carrying FB Member and overseas broker over such accounts.

Chapter 2    Identification of Actual Control Accounts

Article 4          “Actual control” refers to the action or ability of any person (whether an individual or entity) to decide or materially influence the trading decisions of another person (whether an individual or entity) by virtue of its powers to manage, use, receive incomes from, or dispose of the futures account of the latter person.

Article 5          By the principle of “substance over form,” a person is deemed to have actual control over the trading activities of another person’s futures account if the first person:

(1)        is a controlling shareholder of the latter person, defined as any person whose contribution represents 50% or more of the total capital of the latter person, or any shareholder who holds 50% or more of the total shares of the latter person, or any shareholder who, despite having a contribution or shareholding at less than 50%, can nevertheless exercise whatever voting rights granted by its contribution or shareholding to significantly influence the decisions of the shareholders’ meeting or shareholders’ general meeting of the latter person;

(2)        is an agent authorized by the other person to open accounts, place orders, transfer funds, or confirm settlement statements or an agent of another similar type;

(3)        is the legal representative or a principal partner, director, supervisor, or officer of the other person, or shares the same legal representative, principal partner, director, supervisor, or officer with the other person;

(4)        is the spouse of the latter person;

(5)        is a parent, child, or sibling of the latter person and has the decision-making power or a significant influence over the day-to-day trades made through the futures account of the latter person;

(6)        has the decision-making power or a significant influence over the day-to-day trades made through the futures account of the latter person by virtue of an investment, contractual or financing arrangement or other arrangements;

(7)        shows consistent trading behaviors as the other person while providing funds to or receiving funds from the other person for the purpose of futures trading, or shows consistent trading behaviors as the other person while sharing the same trading terminal identifiers as the other person;

(8)        has the decision-making power or a significant influence over the day-to-day trades made through two or more futures accounts of other persons; or

(9)        falls under any other circumstance prescribed by the China Securities Regulatory Commission or identified by the Exchange.

Chapter 3    Filing of Actual Control Accounts

Article 6          Each client shall complete the filing, update, and derecognition of Actual Control Accounts in accordance with the rules of the China Futures Market Monitoring Center (“CFMMC”). The Exchange and CFMMC have established a channel for sharing information on Actual Control Accounts and will use such information in accordance with applicable rules.

Article 7          Any Non-FB Member holding an account meeting the criteria for Actual Control Account shall complete account filing within ten (10) trading days after becoming a Member of the Exchange.

Article 8          Any Non-FB Member that is involved in a change of actual control relationship shall voluntarily file such change with the Exchange within ten (10) trading days following the date of change.

Article 9          Any client that wishes to derecognize an actual control relationship shall submit an application to the CFMMC in accordance with relevant rules, which application will be forwarded by CFMMC to the Exchange for review, and shall provide such explanatory materials as required by the Exchange.

Any Non-FB Member that wishes to derecognize an actual control relationship may submit an application directly to the Exchange and shall provide such explanatory materials as required by the Exchange.

Article 10        Where during its day-to-day market self-regulation the Exchange comes to suspect a previously unfiled account to be involved in an actual control relationship, if such account is held by a client, the Exchange is entitled to inquire into the account through the client’s carrying FB Member, upon which the FB Member shall promptly forward the inquiry to the client; if the account is held by a Non-FB Member, the Exchange is entitled to inquire the Non-FB Member directly. With respect to any client that engages in futures trading through an overseas broker, the relevant FB Member shall promptly forward the inquiry to the overseas broker, who shall then promptly forward the same to the client.

The Non-FB Member or client shall promptly respond to the Exchange’s inquiry in writing and provide the relevant materials; its carrying FB Member and overseas broker shall then promptly forward the client’s response and explanatory materials to the Exchange.

Article 11        Any Non-FB Member or client that acknowledges the existence of an actual control relationship upon an inquiry by the Exchange shall make account filings in accordance with the prescribed procedures. Any Non-FB Member or client that denies the existence of an actual control relationship shall sign a Compliance Statement and Undertaking, upon which the Exchange will review the relevant explanatory materials and take one of the following actions accordingly:

(1)        If the facts and justifications provided by the Non-FB Member or client in the explanatory materials are inadequate and, following investigation, the Exchange determines that the criteria for actual control relationship are indeed met, the Exchange will order the Non-FB Member or client to make filings. Failure to complete such filings within the prescribed time limit is grounds for the Exchange to recognize the account as an Actual Control Account in accordance with its rules. If following investigation the Exchange cannot definitively determine whether the criteria for actual control relationship are met, the Exchange may place the Non-FB Member or client on the monitoring list.

(2)        If the facts and justifications provided by the Non-FB Member or client in the explanatory materials are adequate to establish that an actual control relationship does not exist, the relevant account will not be identified as an Actual Control Account.

Article 12        Any Non-FB Member or client that falls under any of the following circumstances during an inquiry, investigation, or account identification procedure conducted by the Exchange will be subject to such self-regulatory measures as provided below and, if the circumstance is serious, be subject to additional penalties in accordance with the Rules of Zhengzhou Commodity Exchange on Violations:

(1)        failing to respond or truthfully respond to the Exchange’s inquiry, withholding facts, or evading inquiries, which are grounds for such actions by the Exchange as arrangement of a regulatory meeting, issuance of a written warning, restriction of Funds Withdrawals, and restriction from opening new positions;

(2)        failing to file an actual control relationship and only making such filing following the Exchange’s inquiry, which is grounds for such actions by the Exchange as the issuance of an oral warning and the demand for a written explanation;

(3)        failing to file an actual control relationship and to respond or truthfully respond to the Exchange’s inquiry and, following an investigation by the Exchange, being identified as holding an Actual Control Account, which is grounds for such actions by the Exchange as arrangement of a regulatory meeting, issuance of a written warning, restriction of Funds Withdrawals, and restriction from opening new positions.

Article 13        Any Non-FB Member or overseas broker that falls under any of the following circumstances will be ordered to make corrections and be subject to such self-regulatory measures taken by the Exchange as a reminder call, regulatory meeting, supervisory warning letter, and supervisory opinion letter and, if the circumstance is serious, be subject to additional penalties in accordance with the Rules of Zhengzhou Commodity Exchange on Violations:

(1)        failing to inform its clients of the rules of the Exchange on Actual Control Accounts in a timely, accurate, and complete manner;

(2)        failing to register and update information on Actual Control Accounts in a timely, accurate, and complete manner;

(3)        condoning, inducing, encouraging, or assisting a client to make false filings or withholding facts;

(4)        failing to properly preserve client materials in accordance with relevant rules;

(5)        failing to assist an inquiry into a client’s Actual Control Account as required by the Exchange, delaying the process, or withholding or intentionally omitting information; or

(6)        falling under any other circumstance recognized by the Exchange.

Chapter 4    Administration of Actual Control Accounts

Article 14        With respect to a group of accounts linked by actual control relationship, the Exchange will calculate the trades, positions, and other relevant data of the accounts on an aggregate basis when enforcing such mechanisms and rules as position limit, trading limit, and supervision over abnormal trading behaviors.

Article 15        With respect to any group of accounts linked by actual control relationship that consists solely of clients, the aggregate size of positions held by those clients shall not exceed the position limit prescribed for a single client.

With respect to any group of accounts linked by actual control relationship that consists of at least one Non-FB Member, the aggregate size of positions held through those accounts shall not exceed the position limit prescribed for a single Non-FB Member.

Article 16        Where the aggregate positions opened by a group of accounts linked by actual control relationship within a certain period exceeds the trading limit prescribed by the Exchange for a single client, the Exchange may take actions in accordance with the Risk Control Rules of Zhengzhou Commodity Exchange.

Article 17        Any group of accounts linked by actual control relationship whose self-trading, frequent cancellation of orders, frequent cancellation of large orders, or position holding on an aggregate basis has reached the threshold for abnormal trading behaviors under the Rules of Zhengzhou Commodity Exchange on Abnormal Trading Behaviors, will be subject to the self-regulatory measures taken by the Exchange in response to abnormal trading behaviors.

Chapter 5    Ancillary Provisions

Article 18        Unless otherwise provided by these Rules, Non-FB Members are subject to the same rules as clients.

Article 19        The Exchange reserves the right to interpret these Rules.

Article 20        These Rules take effect on November 9, 2018.

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