Nanhua Futures: Strengthening the Service Functions of the Futures Market and Exploring the Distinctive Development Path for Operational Institutions

In the New Era and New Journey, the Development Tasks of the Futures Industry Are Extremely Challenging. As a guiding document for the development of China's capital market, the new "Guo Jiu Tiao" (Nine Articles) provides a clearer understanding of the future development direction of the futures industry," said Luo Xufeng, Vice President of the China Futures Association and Chairman of Nanhua Futures, in an exclusive interview with Shanghai Securities News.

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Managing Risks to Ensure Stable Operations

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The new "Guo Jiu Tiao" proposes a "steady and orderly development of the futures and derivatives markets." Luo Xufeng emphasized that as an essential part of the financial market, the operation of the futures and derivatives markets directly impacts the stability of the entire financial system and the robust operations of numerous real economy enterprises. Therefore, the development of the futures market must closely align with the needs of the real economy. Only by ensuring stable and regulated market operations can the futures and derivatives markets fully function and provide robust support for the development of the real economy.

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For operational institutions, Luo Xufeng believes that as entities providing risk management services, futures companies must first manage their own risks. On one hand, they must deepen their understanding of financial institutions as the main responsible entities, enhance their political standing, and actively undertake the mission of serving the real economy. On the other hand, they must strengthen bottom-line thinking, implement principal responsibilities, and push risk management work to the forefront. For different business types, they need to select targeted measures to control their operational risks and achieve stable operations.

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The Real Economy as the Fundamental Support for Industry Development

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"China's comprehensive industrial system and massive market size are the fundamental support for the development of China's futures market. Especially in ensuring supply and stabilizing prices, maintaining the safety and resilience of the industrial supply chain, and promoting the modernization of agriculture, the futures industry plays an irreplaceable role," Luo Xufeng said.

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He emphasized that futures companies should take serving national development strategies as the focus of their business expansion, utilizing diversified service models and tools such as "insurance + futures," futures price stabilization orders, and options trading. They should prioritize supporting the development of small and medium-sized enterprises and the "three rural" (agriculture, rural areas, and farmers) sectors, meeting financial service needs in areas such as enterprise stabilization and rural revitalization.

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Taking Nanhua Futures as an example, with the support of the Shanghai Futures Exchange, the company pioneered the integration of an industrial spot platform with over-the-counter derivatives tools in its "futures price stabilization order" project. This initiative presented over-the-counter derivatives tools in a productized form to real industry clients, effectively addressing real needs and enhancing the model's promotability and replicability.

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Luo Xufeng believes that in the future, futures companies should further expand their service areas and scope, fully leveraging their professional advantages to deeply engage with industrial chains and provide risk management services across various industries. During this process, they should explore potential client needs, innovate product designs, and tailor risk management solutions for enterprises to enhance service efficiency for the real economy.

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Exploring a Path of Differentiated Development

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In Luo Xufeng's view, the Chinese futures market currently lags behind international mature futures markets and other domestic financial industries such as banking and securities in terms of industry scale, profit margins, personnel quantity, and professional quality. He argues that the overall scale of the futures industry constrains its ability to serve the real economy.

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To address this, Luo Xufeng offers three suggestions: First, futures companies should pursue distinctive development paths suited to their strengths, whether as comprehensive futures and derivatives service providers or by specializing in specific business areas, with clear positioning. Second, they should actively employ innovative methods to enhance their service capabilities. Third, they should establish robust systems and mechanisms to attract outstanding talent, build professional teams, strengthen investment and research capabilities, and offer more differentiated products and services.

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Nanhua Futures, for instance, has significantly advanced its international development in recent years. The company has established a presence in Hong Kong, Chicago, Singapore, and London, covering the Asian, European, and North American time zones. With licenses for futures, securities, and asset management, Nanhua Futures' overseas client equity has surpassed HKD 10 billion. The company holds membership in 14 major exchanges, including the London Metal Exchange (LME) and the Chicago Mercantile Exchange (CME), along with 11 clearing qualifications, providing a safer and more reliable trading environment for domestic enterprises "going global," thereby continuously enhancing its capability to serve the real economy.