(Adopted at the12th meeting of the 8th Board of Governors on March 22, 2024; issued by Announcement [2024] No. 28 on March 28, 2024; effective as of April 1, 2024)

Chapter 1 General Provisions

Article 1 These Rules are made in accordance with the Trading Rules of Zhengzhou Commodity Exchange and the market realities for the purposes of regulating market making activities at the Zhengzhou Commodity Exchange (the “Exchange”), enhancing market liquidity, and promoting the functions of the market.

Article 2 “Market maker” refers to any legal entity or unincorporated organization that is approved by the Exchange to provide two-way quotes and other services for specified futures and option contracts.

Article 3 These Rules apply to the market making and related activities at the Exchange. The Exchange, market makers, and Members shall comply with these Rules.

Chapter 2 Administration of Market Maker Status

Article 4 The Exchange may approve market makers for specified products. The list of these market makers will be publicly announced.

Article 5 The Exchange may classify market makers into tiers for management purposes, and adjust the number and structure of market makers in view of market conditions.

Article 6 The Exchange manages the market maker status by product. An applicant for the market maker status shall:

(1) have RMB 50,000,000 in net assets;

(2) have a dedicated market making department and team, with the team members being familiar with the relevant laws and regulations as well as the Rules of the Exchange;

(3) have sound implementation plan for market making, internal controls, and risk management protocols;

(4) have no record of major illegal or non-compliant activity within the most recent three (3) years;

(5) have in place a stable and reliable computer system for market making;

(6) possess the trading, market making, or simulated market making experience recognized by the Exchange; and

(7) meet other requirements specified by the Exchange.

Article 7 An applicant for the market maker status shall submit the following written materials to the Exchange:

(1) the application form for market making status affixed with its company seal and the signature or seal of its legal representative;

(2) a photocopy of its Business License affixed with its company seal;

(3) the original audited financial statements for the latest accounting period, or a photocopy of such statements affixed with the seal of the accounting firm;

(4) a description of the job positions and job responsibilities within the market making department, and the list and resumes of the head and relevant staff members that will engage in market making activities;

(5) the implementation plan for market making, and a description of its internal controls and risk management protocols;

(6) a declaration of no major illegal or non-compliant activity within the most recent three (3) years;

(7) a description of the market making computer system;

(8) a description of its trading, market making, and simulated market making experience; and

(9) any other documents required by the Exchange.

Article 8 An approved applicant shall sign a market maker agreement (“Agreement”) with the Exchange within ten (10) trading days of receiving the Exchange’s approval notice. The applicant will become a market maker for the relevant products upon signing the agreement.

Article 9 The Exchange may revoke the market maker status of a market maker for a particular product, if the market maker:

(1) fails to fulfill its contractual obligations for two (2) consecutive months or a cumulative of three (3) months within the period prescribed in the Agreement;

(2) no longer meets the qualification requirements for a market maker as prescribed in Article 5 of these Rules; or

(3) falls under any other circumstance for revocation recognized by the Exchange or specified in the Agreement.

Article 10 The Exchange may revoke the market maker status of a market maker for all products, if the market maker:

(1) commits a major illegal or non-compliant act;

(2) is banned from the securities or futures market;

(3) is lawfully acquired, merged into another entity, cancelled, dissolved, or declared bankrupt;

(4) provides any false materials to the Exchange; or

(5) falls under any other circumstance for revocation recognized by the Exchange.

Article 11 Any market maker intending to forfeit its market maker status for a particular product shall apply to the Exchange one (1) month in advance.

Article 12 If a market maker forfeits or is revoked of its market maker status for a particular product, then as of the day the Exchange notifies it of the termination of its status, all relevant agreements it has entered into with the Exchange will automatically terminate and the Exchange will not accept its application for market maker status for the said product within the following one (1) year.

Chapter 3 Market Making

Article 13 A market maker shall engage in market making activities with its dedicated market-maker trading code, which shall not be used for any transactions irrelevant to market making.

Any market maker intending to change its market-maker trading code shall apply to the Exchange in advance.

Any market maker that has changed its market-maker trading code shall not open positions with the original trading code, and shall promptly cancel the original code once the relevant positions have been closed.

Article 14 Any market maker that has lost its market maker status for a product shall close out in a timely manner the relevant positions it has previously established with the corresponding market-maker trading code. If no other product is registered to that trading code, no new positions shall be opened with that code and the code shall be cancelled in a timely manner.

Article 15 The two-way quotes offered by market makers are classified as follows:

(1) continuous quotes, which are the continuous stream of two-way quotes actively provided during the trading hours by a market maker in accordance with the Agreement;

(2) responsive quotes, which are the two-way quotes provided during the trading hours by a market maker in accordance with the Agreement in response to a request for quote on a particular contract.

Article 16 A market maker’s quote consists of the product code, buy price, sell price, and the size of the two-way quote.

Article 17 The two-way quotes of market makers shall all be submitted as limit orders.

A market maker shall offer two-way quotes in the case of an option product, and either two-way quotes or both a buy limit order and a sell limit order in the case of a futures product.

Any unfilled order previously submitted as two-way quotes by a market maker will be automatically cancelled upon its submission of the updated two-way quotes for the same contract.

Article 18 The position limit for market makers is as determined and publicly announced by the Exchange.

A market maker may apply to the Exchange for a higher position limit if it is needed for meeting its market making obligations.

Chapter 4 Rights and Obligations

Article 19 The Exchange may provide a market maker with reductions and/or exemptions of transaction fees, incentives, etc. in accordance with the Agreement and its market making performance.

The Exchange shall set transaction fee reduction or exemption rates based on the performance of the product for which the market making is carried out and other circumstances, and shall stipulate the rates with the market maker in the Agreement.

Article 20 A market maker shall perform the obligations under and in accordance with the Agreement.

Article 21 A futures market maker is released from its quoting obligations under the following market conditions:

(1) during the opening auction for futures contracts, the market maker is released from its quoting obligation with respect to all contracts for which it acts as a market maker;

(2) whenever a futures contract for which it acts as a market maker reaches the price limit, the market maker is released from its quoting obligation with respect to that futures contract;

(3) whenever the dominant contract for a futures product for which it acts as a market maker reaches the price limit, the market maker is released from its quoting obligation with respect to all contracts for which it acts as a market maker; and

(4) any other circumstance recognized by the Exchange.

A market maker shall resume its corresponding market making obligations once the above conditions no longer apply.

Article 22 An options market maker is released from its quoting obligations under the following market conditions:

(1) during the opening auction for option contracts, the market maker is released from its quoting obligation with respect to all contracts for which it acts as a market maker;

(2) whenever the underlying futures contract reaches the price limit, the market maker is released from its quoting obligation with respect to all option contracts of the corresponding contract month;

(3) whenever an option contract reaches the price limit, the market maker is released from its quoting obligation with respect to that option contract;

(4) whenever an OTM option contract is trading at a price below the threshold specified in the Agreement, the market maker is released from its quoting obligation with respect to that option contract; and

(5) any other circumstance recognized by the Exchange.

A market maker shall resume its corresponding market making obligations once the above conditions no longer apply.

Article 23 A market maker is only entitled to the corresponding rights of a market maker if it has fulfilled the obligations specified in the Agreement within the prescribed period.

Chapter 5 Supervision

Article 24 The Exchange supervises market makers in accordance with these Rules and relevant Rules, with which market makers and their carrying FB Members shall provide cooperation.

Article 25 Market makers shall offer quotes that are reasonable for the market conditions.

Article 26 No market maker shall take advantage of market making activities to engage in insider trading, market manipulation, fraud, or other illegal or non-compliant activities, or to seek other improper interests.

Article 27 Each market maker shall establish a sound IT management framework and emergency response mechanism; inform the Exchange in a timely manner regarding the development, testing, connection, upgrade, and other changes to its market making computer system; and participate in relevant tests and emergency drills as requested by the Exchange.

Article 28 The Exchange may evaluate and rank market makers based on their market making performance and may publish the result of this evaluation.

Article 29 Any change in a market maker’s controlling shareholders (or partners), business premises, legal representative, head of market making business or the head’s contact information, or any material change in its financial conditions or computer system, shall be reported by the market maker to the Exchange in writing within three (3) trading days of the change.

Article 30 A market maker shall submit reports on its market making activities as required by the Exchange, and properly preserve relevant trading and risk control records for possible future examination.

Article 31 The Exchange may supervise and check market makers in such areas as risk management, trading activities, system operations, business operations, and credit standing, with which market makers shall provide assistance and cooperation.

Chapter 6 Ancillary Provisions

Article 32 Any violation of these Rules will be handled in accordance with the Rules of Zhengzhou Commodity Exchange on Violations.

Article 33 The Exchange reserves the right to interpret these Rules.

Article 90 These Rules take effect on April 1, 2024.

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