On October 20, the Dalian Commodity Exchange (DCE) officially announced the launch of monthly average futures for linear low-density polyethylene (LLDPE), polyvinyl chloride (PVC), and polypropylene (PP), which will commence trading at 21:00 on October 28 (Tuesday).
As one of the first futures contracts in the domestic commodity market designed for average price trading scenarios, the introduction of these monthly average futures not only fills a gap in average price risk management tools domestically but also facilitates long-cycle trade in the chemical industry through an innovative cash settlement mechanism. This marks a significant advancement in the ability of China's chemical derivatives market to serve the real economy.
According to the listing notice and previously published business details, the trading unit for these monthly average futures contracts will be 5 tons per lot, with a quotation unit of yuan (RMB) per ton and a minimum price fluctuation of 1 yuan per ton. The contract months will correspond to January through December, aligning completely with the existing physical delivery futures contracts for clearer comprehension by market participants. The trading codes will be “Lcontract monthF”, “Vcontract monthF”, and “PPcontract monthF”. For instance, PP2602F represents the monthly average futures contract for polypropylene for February 2026.
To enhance liquidity, on the first day of trading for the monthly average futures, contracts for the months of 2602, 2603, and 2604 will be offered, with the listing benchmark price set as the settlement price of the corresponding physical delivery futures contracts on October 28 (e.g., the benchmark price for the L2602F contract will be based on the settlement price of the L2602 contract on October 28). Subsequently, after the close of trading on the last trading day of each month, new contracts will be added based on the farthest month of the already listed monthly average futures (e.g., after the market close on October 31, contracts L2605F, V2605F, and PP2605F will be added), ultimately covering a total of six near-month contracts.
Regarding delivery methods, the monthly average futures will notably adopt a “cash settlement” mechanism, where the exchange will directly transfer profits and losses between the parties based on the delivery settlement price, synergizing with the physical delivery futures to provide more diverse solutions for industrial clients.
In terms of contract expiration, the last trading day and last delivery day for the monthly average futures are set to be the same, which is the last trading day of the month prior to the contract month (for example, the last trading day for the L2602F contract will be January 30, 2026).
Regarding risk control systems, the monthly average futures will follow a mature market framework and enhance details: the margin ratio, price limits, and trading limits will remain consistent with corresponding physical delivery futures and will be adjusted simultaneously. The standard trading fee is set at 1 yuan per lot, while the fee for hedging transactions is set at 0.5 yuan per lot. The position limit will be stricter than that of the corresponding physical delivery futures contracts. Specifically, from the contract listing until the 14th trading day before the month of the contract, if the unilateral position exceeds 200,000 lots, the position limit for non-futures company members and clients will be 4,000 lots; if the unilateral position is greater than 200,000 lots, the limit will be 2% of the unilateral position. After the 15th trading day before the contract month, the position limit will be reduced to 1,000 lots, implementing refined controls to prevent market risks and ensure the stable operation of the product.
For the pricing mechanism of the settlement price, the DCE innovatively adopts a “phased calculation” model, ensuring price fairness and preventing market manipulation risks from the source. Specifically, on all trading days prior to the month before the contract month, the daily settlement price of the monthly average futures will be directly anchored to the daily settlement price of the corresponding physical delivery futures. Once entering the expiration month (the month before the contract month), the settlement price calculation will shift to an "averaging model," where the daily settlement price will be determined by the arithmetic mean of the actual settlement prices of the currently trading days against the corresponding physical delivery futures as well as the estimated settlement prices of the remaining trading days (using the latest trading day's settlement price). This more accurately reflects the “monthly average” pricing logic. For example, for the L2605F contract, if the settlement prices for the first three trading days of April 2026 (the month before the contract month) are 8293 yuan/ton, 8279 yuan/ton, and 8254 yuan/ton, and the subsequent 18 trading days are all estimated at 8254 yuan/ton (the latest settlement price), then the settlement price on the third trading day in April would be (8293 + 8279 + 8254 + 8254 × 18) / 21 = 8257 yuan/ton. The delivery settlement price will be determined as the arithmetic average of all settlement prices of the corresponding physical delivery futures for all trading days in the month prior to the contract month, aligning precisely with the pricing model of the average spot market, facilitating smooth transitions between hedging needs and tool design.
For trading instructions, the monthly average futures for the three chemical products will support three types of arbitrage trading instructions, including intraclass inter-month arbitrage (i.e., different monthly contracts of the same monthly average futures, such as SP L2602F & L2603F), interclass arbitrage (i.e., contracts of different monthly average futures for the same contract month, such as SPC L2602F & V2602F), as well as the upcoming introduction of arbitrage between different delivery mechanisms (i.e., between physical delivery futures and corresponding monthly average futures, such as SP L2602 & L2602F).
The notice also specifies details regarding the declaration fees, combined margins, public position information, trading limits, and alerts relevant parties to adequately prepare for the launch of the monthly average futures of the three chemical products, emphasizing risk prevention to ensure smooth market operation. Furthermore, according to the DCE's announcement on the same day, starting from the night trading session on October 28, the three chemical products' monthly average futures will be included in the accessible varieties for qualified foreign institutional investors.
Since the China Securities Regulatory Commission approved the registration of this variety on July 25, the DCE has been advancing pre-listing preparations efficiently with a target of “high-standard listing and high-efficiency services.” This includes actively conducting market cultivation activities through both online and offline channels, and collective presentations as well as one-on-one training across various regions, and ensuring the stable operation of the technical system through simulation trading and multiple market-wide testing.
A responsible person from Zhejiang Hangshishan Industrial Co., Ltd. stated that the launch of the monthly average futures will further enrich enterprises’ pricing strategies for spot trade. The monthly average futures not only provide a fair average price signal for the spot market but also facilitate enterprises in formulating more diverse strategies to hedge risks.
A representative from the Materials China Yun Group Co., Ltd. noted that due to the ongoing release of production capacity, companies in the plastics sector are actively exploring export channels, making the launch of the monthly average futures a timely reference for pricing. This holds positive significance for enhancing the international market price influence of China’s plastic industry and supporting the high-quality development of the industry.
A DCE business representative emphasized that the launch of the monthly average futures represents an important measure in the futures market that closely aligns with industrial demands and innovates service models. It will complement existing physical delivery futures, jointly constructing a more comprehensive ecosystem for chemical derivatives while further enhancing the international influence of China’s chemical product prices. The DCE is actively and orderly advancing all preparations ahead of the monthly average futures listing to ensure a smooth launch and stable operation.
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