(Adopted at the 16th meeting of the 8th Board of Governors on July 3, 2024;  issued by Announcement [2024] No. 91 on July 19, 2024; effective as of October 24, 2024)

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 regulation of the futures market, regulating futures trading activities, and protecting the lawful rights and interests of futures market participants.

Article 2 The Zhengzhou Commodity Exchange (the “Exchange”) supervises futures trading activities and, upon discovering any abnormal circumstances, may initiate the response procedures for abnormal trading behaviors and impose self-regulatory measures on the relevant Members, overseas brokers, and clients.

Article 3 Each futures brokerage Member (“FB Member”) and overseas broker shall duly supervise the trading activities of its clients; shall promptly identify, report, and stop clients’ abnormal trading behaviors; and shall not condone, induce, encourage, or support clients to engage in abnormal trading activities.

Article 4 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; accept the self-regulatory measures of the Exchange; and voluntarily regulate its own trading behaviors. A client shall additionally accept the oversight of its carrying FB Member and overseas broker over the lawfulness and compliance of its trading activities.

Chapter 2    Determination of Abnormal Trading Behaviors

Article 5 Any of the following acts during futures trading will be deemed an abnormal trading behavior by the Exchange:

(1)  wash trading, i.e., trading with oneself as the counterparty;

(2)  frequent order cancellation, i.e., frequent placement and cancellation of orders;

(3)  large order cancellation, i.e., frequent placement and cancellation of large orders;

(4)  disruptive algorithmic trading, i.e., placement of trading orders through an algorithmic trading program in a manner that may undermine the security of the Exchange’s system or disrupt the normal course of trading; or

(5)  any other behavior prescribed by the China Securities Regulatory Commission or identified by the Exchange.

Article 6 A client or a group of accounts linked by actual control relationship is deemed to have reached the threshold for the abnormal trading behavior of wash trading, frequent order cancellation, or large order cancellation if such client or such group on an aggregate basis:

(1)  executes five (5) or more self-trades in a contract in a single trading day;

(2)  cancels five hundred (500) or more orders in a contract in a single trading day, or cancels one hundred (100) or more buy (sell) orders at the upper (lower) price limit in a single trading day after that contract has reached the price limit on that day; or

(3)  cancels fifty (50) or more orders in a contract in a single day with each cancellation amounting to eight hundred (800) lots or more.

Article 7 Trades concluded between clients within a group of accounts linked by actual control relationship are deemed as self-trades.

Article 8 Self-trades, frequent order cancellations, and large order cancellations resulting from hedging activities are not deemed as abnormal trading behaviors.

Article 9 Self-trades, frequent order cancellations, and large order cancellations resulting from market orders and spread orders are not deemed as abnormal trading behaviors.

Article 10 Frequent order cancellations resulting from market making activities are not deemed as abnormal trading behaviors.

Article 11 Except for the circumstances under Article 8, Article 9 and Article 10, frequent order cancellations relating to contracts with order fees and meeting the circumstances announced by the Exchange are not deemed as abnormal trading behaviors.

Article 12 If on a single trading day a client or a group of accounts linked by actual control relationship reaches the threshold for the abnormal trading behavior of wash trading, frequent order cancellations, or large order cancellations in two (2) or more contracts, the same kind of abnormal trading behavior in relation to these contracts will be deemed as a single occurrence of that abnormal trading behavior.

Chapter 3    Handling of Abnormal Trading Behaviors

Article 13 The Exchange takes actions in accordance with the following procedures against any client that has reached the threshold for wash trading, frequent order cancellations, or large order cancellations:

(1)  At the first infraction, the Exchange will alert the client’s carrying FB Member on the current day and require it to promptly forward the Exchange’s concern to the client and to inform and provide guidance to the client and dissuade and prevent it from further infractions;

(2)  At the second infraction, the Exchange will place the client on the supervisory watchlist;

(3)  At the third infraction, the Exchange will, after market close on the current day, suspend the client from opening new positions for no less than one (1) month.

Article 14 Cancellation by a client of one hundred (100) or more buy (sell) orders at the upper (lower) price limit in a single trading day, with ten thousand (10,000) lots or more cancelled in aggregate, after that contract has reached the price limit on that day, is deemed as an aggravated frequent order cancellation and is grounds for the Exchange to suspend, after market close on that day, the client from opening new positions for no less than one (1) month.

Article 15 Where a client’s abnormal trading behavior of wash trading, frequent order cancellation, or large order cancellation takes place through two (2) or more FB Members, the Exchange will alert the FB Member through whom the highest occurrence count of the said abnormal trading behavior has taken place.

Article 16 The Exchange takes actions in accordance with the following procedures against any Non-FB Member that has reached the threshold for wash trading, frequent order cancellations, or frequent large order cancellations:

(1)  At the first infraction, the Exchange will alert the Non-FB Member;

(2)  At the second infraction, the Exchange will hold a meeting with the officers of the Non-FB Member;

(3)  At the third infraction, the Exchange will, after market close on the current day, suspend the Non-FB Member from opening new positions for no less than three (3) months.

Article 17 Any group of accounts linked by actual control relationship that has reached the threshold for wash trading, frequent order cancellations, or large order cancellations, will be subject to actions taken in accordance with Articles 13 to 16 of these Rules.

Article 18 The Exchange may take such self-regulatory measures as arranging for a regulatory meeting and restricting the opening of new positions against any client who places trading orders through an algorithmic trading program in a manner that undermines the security of the Exchange’s system or disrupts the normal course of trading.

Article 19 Any client that has engaged in an abnormal trading behavior may, based on the severity of the infraction and in addition to any actions and procedures already taken in accordance with these Rules, be subject to such disciplinary sanctions as demand for a written explanation, issuance of a written warning, arrangement for a regulatory meeting, restriction of Funds Withdrawals, demand for the close-out of positions within a prescribed time limit, and forced liquidation and, if the circumstance is serious, be subject to additional penalties in accordance with the Rules of Zhengzhou Commodity Exchange on Violations.

Chapter 4    Supervisory Responsibilities

Article 20 FB Members and overseas brokers shall closely monitor the trading activities of clients, proactively prevent any potential abnormal trading behaviors, and help clients to trade in a rational and compliant manner.

Any FB Member or overseas broker that finds a client engaging in any of the abnormal trading behaviors prescribed in Article 5 of these Rules shall promptly alert, dissuade, and stop the client.

Article 21 After the Exchange has taken a self-regulatory measure against a client for abnormal trading behavior, the relevant FB Member and overseas broker shall promptly notify the client and take effective measures to regulate its trading activities.

Where a client is found to have engaged in any of the abnormal trading behaviors prescribed in Article 5 of these Rules, the Exchange may, based on the severity of the situation, take such self-regulatory measures against the relevant FB Member or overseas client as issuing an alert, arranging for a regulatory meeting, issuing a supervisory warning letter, and issuing a supervisory opinion letter.

Article 22 Any Non-FB Member or overseas broker that falls under any of the following circumstances may be ordered to make corrections and be subject to such self-regulatory measures taken by the Exchange as an alert, 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 promptly and accurately forward or communicate to a client the self-regulatory measure taken against the client by the Exchange;

(2)  failing to take effective measures to stop the abnormal trading behavior of a client;

(3)  condoning, inducing, encouraging, or supporting a client to engage in abnormal trading activities;

(4)  failing to duly assist the investigation of a suspected illegal or non-compliant activity as required by the Exchange, delaying the process, or withholding or intentionally omitting information; or

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

Article 23 Any FB Member that has already been issued two supervisory warning letters by the Exchange for neglect of duty, committed either by the FB Member itself or by an overseas broker it provides brokerage services to, will be issued a supervisory opinion letter for the third occurrence of negligence.

Chapter 5    Ancillary Provisions

Article 24 Unless otherwise provided by these Rules, Non-FB Members are subject to the same rules as clients.

Article 25  “Futures trading” as referred to in these Rules includes the trading of both futures contracts and option contracts.

Article 26 The occurrence count of abnormal trading behaviors and regulatory measures under these Rules is calculated on a calendar year basis.

Article 27 The terms “or more” and “not more than” as used in these Rules include the given number.

Article 28 The Exchange reserves the right to interpret these Rules.

Article 29 These Rules take effect on October 24, 2024.

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