(Adopted 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 the date of issuance)

Chapter 1    General Provisions

Article 1          These Rules are made in accordance with the Trading Rules of Zhengzhou Commodity Exchange and Membership Rules of Zhengzhou Commodity Exchange for the purposes of strengthening the oversight of futures trading by futures brokerage Members (“FB Members”) on behalf of overseas brokers.

Article 2          “Overseas broker” as referred to in these Rules means any financial institution duly established outside the Chinese mainland and recognized by its home futures regulatory authority as being qualified to accept traders’ funds and trading orders and to engage in futures trading in its own name for the said traders.

Article 3          Any FB Member that accepts the engagement of an overseas broker for its futures trading services shall meet the requirements prescribed by the China Securities Regulatory Commission (“CSRC”).

Article 4          These Rules apply to FB Members, overseas brokers, and their respective futures trading staff.

Chapter 2    Rules on Provision of Services

Article 5          Any overseas broker that intends to engage an FB Member to take part in futures trading shall:

(1)        be a financial institution duly established outside the Chinese mainland and recognized by its home futures regulatory authority as being qualified to accept traders’ funds and trading orders and to engage in futures trading in its own name for the said traders;

(2)        have been operating as a going concern for one (1) year or more;

(3)        accept the supervision and regulation of its home futures regulatory authority and the said authority has entered into a memorandum of understanding on regulatory cooperation with the CSRC;

(4)        have sound governance structure and internal controls and have been operating in a compliant manner;

(5)        have a net capital of RMB 30,000,000 or the equivalent foreign currency;

(6)        possess the business facilities and computer systems that meet the relevant technical specifications and are operationally sound; and

(7)        meet other requirements specified by the Zhengzhou Commodity Exchange (the “Exchange”).

Article 6          An FB Member and the overseas broker requesting for its services shall enter into a written service agreement.

The service agreement shall provide for the following matters:

(1)        scope of services;

(2)        minimum margin requirement, and the procedures and fee rate for posting assets as margin;

(3)        measures, conditions, and procedures for risk management;

(4)        types and management models of various accounts and the clearing procedures;

(5)        rates of various service fees;

(6)        use of information and confidentiality rules;

(7)        matters to be communicated by a notice and the means and time limit of notices;

(8)        security and stability for the transmission of trading data;

(9)        collaboration procedures and rules with respect to such matters as trading, clearing, delivery, funds management, market data and trading system configurations, client service, and risk control;

(10)      recovery of losses resulting from forced liquidation;

(11)      circumstances under which losses are not attributable to either party and how such situations may be resolved;

(12)      amendment and termination of the service agreement;

(13)      liability for breach of contract;

(14)      means of resolving disputes and jurisdiction;

(15)      governing law; and

(16)      any other matters specified by the Exchange.

The overseas broker shall undertake in the service agreement that when engaging in futures-related activities within the Chinese mainland, it will comply with the laws, regulations, and ministry-level rules of the People’s Republic of China as well as the Rules, provisions, and decisions of the Exchange, and will not harm the lawful rights and interests of its own clients and other market participants.

Article 7          An FB Member shall make filings with the Exchange after entering into a service agreement with an overseas broker and before conducting relevant businesses.

The FB Member shall provide the following materials for the filing:

(1)        filing statement;

(2)        documents provided by the overseas broker that demonstrate its satisfaction of the requirements under Article 5 of these Rules, as well as the valid identity certificate, resume, and specimen signature and seal of the overseas broker’s head of futures risk management;

(3)        documents on the rules, internal controls, and risk management protocols of the FB Member in relation to its provision of futures trading services to overseas brokers;

(4)        the service agreement signed with the overseas broker; and

(5)        any other documents specified by the Exchange.

The Exchange will determine whether to approve a filing within fifteen (15) trading days of its receipt of the full and conforming set of the filing materials. In the case of approval, the Exchange will issue a filing number and notify the FB Member in writing; in the case of non-approval, the Exchange will provide a written explanation for its decision.

Article 8          Any FB Member that intends to amend a service agreement shall submit an amendment filing request and the corresponding materials before the amendment. The Exchange will notify the FB Member in writing of the results of the filing within ten (10) trading days of receiving the relevant materials.

Article 9          An FB Member shall submit the relevant materials and request for a filing cancellation within five (5) trading days after the termination of a service agreement. The Exchange will notify the FB Member in writing of the results of the filing cancellation within ten (10) trading days of receiving the relevant materials.

Article 10        An FB Member may create an omnibus account for each overseas broker to facilitate the clearing and delivery of futures trades of the latter’s overseas clients. In this case, the FB Member shall collect margin with respect to the omnibus account and record account entries only down to the level of the overseas broker (omnibus account).

Article 11        An overseas broker shall comply with the risk control rules and other requirements of the Exchange and collaborate with its carrying FB Member to strictly control risks.

Article 12        An overseas broker shall verify the real names of its clients, retain the documents and audiovisual materials from opening accounts for clients, and apply for a trading code for each of its clients in accordance with the rules of the China Futures Market Monitoring Center (“CFMMC”). An overseas broker shall additionally assist its FB Member in fulfilling the necessary risk management responsibilities.

The FB Member shall assist the overseas broker in opening a trading account and obtaining a trading code for each overseas client in accordance with the rules of the CFMMC.

Article 13        Futures-related funds transfers between an overseas broker and its FB Member shall be made through the futures settlement account of the overseas broker and the dedicated margin account of the FB Member.

Article 14        An overseas broker shall provide its clients with the market data of, and trading access to, the Exchange, keep its equipment in good maintenance, and ensure the data and trading channels are fully operational.

Article 15        An overseas broker shall route clients’ trading orders directly to its FB Member. Order execution off the Exchange is prohibited.

Article 16        An FB Member shall, following market close of each trading day, conduct trade clearing for each overseas broker it serves and provide the settlement results to the overseas broker in a timely manner and by such means as they have previously agreed.

Article 17        Physical delivery and any exchange of futures for physical transactions of a client of an overseas broker shall be handled by the carrying FB Member at the request of the overseas broker.

Article 18        Each overseas broker shall establish a backup system for trading, clearing, and financial data. The materials and records related to the opening, change, and closure of a client’s account, as well as a client’s trading orders, clearing, erroneous orders, and complaints records and other business records, shall be preserved for not less than twenty (20) years following the date of termination of the futures brokerage agreement with the client.

Article 19        An FB Member is responsible for the funds balance check and risk control with respect to the futures trading activities conducted at the Exchange by each overseas broker it serves.

Article 20        Any overseas broker that has terminated its business relationship with a client shall complete the account closure procedures in a timely manner, to which its FB Member shall provide assistance.

Chapter 3    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 the date of issuance.

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