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About INE
TAS Guideline
Instructions on Trade at Settlement (TAS) Orders
I. Basic Rules
(1)
Trade at Settlement (TAS) is an order type that allows a trader to enter an order to buy or sell an eligible futures contract (“eligible contract”) at the current day’s settlement price or a number of tick sizes above or below the settlement price. The eligible contracts are specified by the Exchange.
(2)
TAS orders may only be matched with other TAS orders for the same contract. TAS orders are matched by the “trading volume maximization” rule during central auction and by price-time priority during continuous auction.
(3)
After TAS orders are executed, the transaction price will be calculated according to the order matching rules, and finalized after the daily settlement price of corresponding eligible contract is determined. Under no circumstances can the final transaction price exceed the price limit for that contract.
(4)
For eligible contracts, a TAS order may be indicated as “open”, “close today” or “close previous”; and “general” or “hedging”.
(5)
TAS orders cannot be attached with the fill-or-kill (FOK) or fill-and-kill (FAK) for the time being.
(6)
TAS orders are available during the central auction, the first trading session, and 10:30 a.m. to 11:30 a.m. of the daytime trading hours. At the end of the TAS trading hours, all unfilled TAS orders will be automatically canceled by the system.
II. Special Notes
(1)
The trading privileges and minimum and maximum order sizes for an eligible contract also apply to the TAS orders for that contract. For purposes of the position limit, hedging quota, and trading limit, TAS orders are calculated on an aggregated basis with other orders in the eligible contract.
(2)
If an eligible contract is trading at the price limit or TAS orders on that contract are being executed at the maximum or minimum permitted number of tick sizes, the TAS orders in the contract will not be matched by the principle of “close-out orders first” and will not affect the determination of Limit-locked Market.
(3)
Market data on eligible contracts published during the trading hours does not include the turnover or trading volume from TAS transactions, while the open interest from TAS transactions is included in the change of open interest of the eligible contracts. Statistics following market close and settlement do reflect TAS transactions in the turnover and trading volume of the corresponding contracts.
(4)
During the trading hours, the Exchange will calculate the margin to be frozen or released for TAS transactions based on the settlement price of the eligible contract of the previous trading day and the rules of larger-side margining (or portfolio margining once it is launched). During daily settlement at market close, the Exchange will calculate and collect margin on the positions established by TAS transactions based on the settlement price of the eligible contract of the current day and the rules of larger-side margining (or portfolio margining once it is launched).
III. TAS Order Examples
(1) Opening New Position – Example 1
Assume a client has no existing position on SC2308 and places a TAS order for 40 lots on SC2308 as “long, general, open”, which is then matched with an existing TAS order for short 15 lots at a price of 1.2 yuan/ barrel. As a result, the client will hold 15 lots of long, general, and today’s position on SC2308. The remaining 25 lots will be automatically canceled by the system if they cannot be matched by 11:30 a.m.
If at market close the settlement price of SC2308 is determined to be 560.7yuan/barrel, then the 15 lots filled through the TAS order will be finally traded at 561.9 yuan/barrel.
(2) Opening New Position – Example 2
Assume a client has no existing position on SC2309 and submits a TAS “short, general, open” order for 10 lots. After 5 lots are filled at a price of -0.8 yuan/barrel, the client will hold 5 lots of short, general, and today’s position on SC2309. If now the client places and executes a limit order (not TAS) for 3 lots of SC2309 as “long, general, and close today”, the client will hold 2 lots of short, general, and today’s position on SC2309.
If at market close the settlement price of SC2309 is determined to be 559.6 yuan/barrel, then the 5 lots filled through the TAS order will be finally traded at 558.8 yuan/barrel.
(3) Closing Out Today’s Position
Assume a client has no existing position on SC2309 and submits a limit order (not TAS) for 10 lots of SC2309 as “short, general, and open”. After 4 lots are filled, the client will hold 4 lots of short, general, and today’s position on SC2309. If the client then places and executes a TAS “long, general, close today” order for 1 lot at 0 yuan/barrel, the client will hold 3 lots of short, general, and today’s position on SC2309.
If at market close the settlement price of SC2309 is determined to be 559.6 yuan/barrel, then the 1 lot filled through the TAS order will be finally traded at 559.6 yuan/barrel.
(4) Closing out Previous Positions
Assume a client holds 50 lots of long, hedging, and previous position on SC2310 and submits a TAS “short, hedging, close previous” order for 50 lots. Once 40 lots of the order are filled at -1.0 yuan/barrel, the client will hold 10 lots of long, hedging, and previous position on SC2310.
If at market close the settlement price of SC2310 is determined to be 553.7 yuan/barrel, then the 40 lots filled through the TAS order will be finally traded at 552.7 yuan/barrel.
(5) TAS Orders Trading at the Price Limit
On a given day the lower price limit of SC2311 is 551.2 yuan/barrel. Assume a client has no existing position on SC2311 and submits a TAS “short, general, and open” order for 10 lots on that day. Once 5 lots of the order are filled at -2.0 yuan/barrel, the client will hold 5 lots of short, general, and today’s positions on SC2311.
At market close the settlement price of SC2311 is determined to be 552.9 yuan/barrel. Because the rules of the Exchange say that the transaction price of TAS orders may not exceed the upper or lower limit price of the contract, the 5 lots filled through the TAS order will be finally traded at 551.2 yuan/barrel.
Q&As on TAS for Crude Oil Futures
1. TAS Trading Mechanism
Q1: What is TAS?
A: TAS, short for Trade at Settlement, is an order type that allows a trader to buy or sell an eligible futures contract during specified trading hours at the current day’s settlement price or a certain number of ticks of the outright above or below that price.
A: TAS, short for Trade at Settlement, is an order type that allows a trader to buy or sell an eligible futures contract during specified trading hours at the current day’s settlement price or a certain number of ticks of the outright above or below that price.
Q2: Why does INE launch TAS orders?
A: TAS order aims to provide an efficient and effective risk management tool in the market which can lower traders’ risk management costs, so as to enhance the proportion of brick-and-mortar enterprise investors and the crude oil price influence.
For brick-and-mortar enterprises, the futures settlement price is often used as the benchmark price in spot trading. These enterprises used to place orders frequently to simulate the settlement price, which is difficult to execute as well as inefficient for hedging. TAS orders enable investors to trade at or near the settlement price during specified trading hours, which will greatly reduce the uncertainty they used to face when hedging. As a result, they can exercise better risk management easily with TAS.
A: TAS order aims to provide an efficient and effective risk management tool in the market which can lower traders’ risk management costs, so as to enhance the proportion of brick-and-mortar enterprise investors and the crude oil price influence.
For brick-and-mortar enterprises, the futures settlement price is often used as the benchmark price in spot trading. These enterprises used to place orders frequently to simulate the settlement price, which is difficult to execute as well as inefficient for hedging. TAS orders enable investors to trade at or near the settlement price during specified trading hours, which will greatly reduce the uncertainty they used to face when hedging. As a result, they can exercise better risk management easily with TAS.
In western financial markets, in addition to brick-and-mortar enterprises, institutional investors including ETFs and long-term capital management funds also use TAS for position transfers which require lower fees for hedging purposes. Moreover, it will also reduce the short-term adverse effect of position transfers to the market.
To sum up, TAS trading will enhance the hedging efficiency for entities as an efficient risk management tool, attract more diversified market participants and enhance the proportion of brick-and-mortar investors. As it is more convenient for global investors to refer to China’s futures prices, the price influence will surely be improved.
2. TAS for Crude Oil Futures
Q1: Who can place TAS orders for crude oil futures?
A: Any trader of crude oil futures can place TAS orders.
Q1: Who can place TAS orders for crude oil futures?
A: Any trader of crude oil futures can place TAS orders.
Q2: Which crude oil futures contracts are eligible for TAS orders?
A: TAS order is only available to the nearby crude oil futures contract and the three monthly contracts thereafter (hereinafter referred to as the “eligible contracts”), and will no longer be available after the market close on the eighth trading day preceding the last trading day of the relevant eligible contract.
A: TAS order is only available to the nearby crude oil futures contract and the three monthly contracts thereafter (hereinafter referred to as the “eligible contracts”), and will no longer be available after the market close on the eighth trading day preceding the last trading day of the relevant eligible contract.
Q3: What is the price quote of TAS orders for crude oil futures?
A: The price range for TAS orders is the underlying contract’s daily settlement price ± 2 yuan/barrel. TAS orders executed at above or below the contract’s price limit will be settled at the corresponding price limit.
A: The price range for TAS orders is the underlying contract’s daily settlement price ± 2 yuan/barrel. TAS orders executed at above or below the contract’s price limit will be settled at the corresponding price limit.
Q4: What are the trading hours of TAS orders for crude oil futures?
A: TAS orders for crude oil futures are available during the opening auction, the first trading session, and 10:30 a.m. to 11:30 a.m. of the daytime trading hours. At the end of the TAS trading hours, all unmatched TAS orders are automatically cancelled by the system.
A: TAS orders for crude oil futures are available during the opening auction, the first trading session, and 10:30 a.m. to 11:30 a.m. of the daytime trading hours. At the end of the TAS trading hours, all unmatched TAS orders are automatically cancelled by the system.
Q5: What are the matching rules of crude oil TAS orders?
A: TAS orders may only be matched with other TAS orders for the same contract. TAS orders are matched by the “trading volume maximization” rule during central auction and by price-time priority during continuous auction.
A: TAS orders may only be matched with other TAS orders for the same contract. TAS orders are matched by the “trading volume maximization” rule during central auction and by price-time priority during continuous auction.
Q6: What are the attributes of TAS orders for crude oil futures?
A: Same as other orders, TAS orders may be indicated as “open”, “close today”, or “close previous”; and “general” or “hedging.”
Q7: Can other properties be attached with a TAS order for crude oil futures?
A: TAS orders cannot be attached with the properties of fill-or-kill (FOK) or fill-and-kill (FAK) for the time being.
Q8: How will INE collect the margin of a TAS trade for crude oil futures?
A: During the trading hours, INE will calculate the margin to be frozen or released for a TAS trade based on the previous settlement price of the underlying contract, and will include the margin into the larger-side margining.
At the end of a trading day, INE will collect the margin for a TAS trade based on that day’s settlement price of the underlying contract, and will include the margin into the larger-side margining.
Q9: How will INE collect the transaction fees of a TAS trade for crude oil futures?
A: Please refer to the provisions on TAS-eligible crude oil futures contracts.
Q10: How to access the market data of TAS trades for crude oil futures?
A: Traders can find relevant market data on the official websites and member service systems of SHFE and INE, or through the apps of other data providers. Market data of TAS-eligible contracts published during trading hours does not include turnover and trading volume from TAS transactions. Statistics following market close and settlement do reflect TAS transactions in the turnover and trading volume of the corresponding contracts.
Q11: If the eligible contract is traded only by TAS order, how would the daily settlement price be determined?
A: If the eligible contract is traded only by TAS order, it will be considered as having not been executed on that day, and its daily settlement price will be determined in the same manner in accordance with the Clearing Rules of the Shanghai International Energy Exchange as for futures contracts without an execution price. For example, if the settlement price for SC2010 is $305.0/bbl and a TAS sell order is matched at $1.2/bbl, then the TAS order will be settled at $306.2/bbl. TAS orders executed at above or below the contract’s price limit will be settled at the corresponding price limit.
3. TAS Order Examples
Q1: How to open positions using TAS?
A: Example 1:
Assume a client has no existing position on SC2308 and places a TAS order for 40 lots on SC2308 as “long, general, open”, which is then matched with an existing TAS order for short 15 lots at a price of 1.2 yuan/barrel. As a result, the client will hold 15 lots of long, general, and today’s position on SC2308. The remaining 25 lots will be automatically canceled by the system if they cannot be matched by 11:30 a.m.
If at market close the settlement price of SC2308 is determined to be 560.7 yuan/barrel, then the 15 lots filled through the TAS order will be finally traded at 561.9 yuan/barrel.
Example 2:
Assume a client has no existing position on SC2309 and submits a TAS “short, general, open” order for 10 lots. After 5 lots are filled at a price of -0.8 yuan/barrel, the client will hold 5 lots of short, general, and today’s position on SC2309. If now the client places and executes a limit order (not TAS) for 3 lots of SC2309 as “long, general, and close today”, the client will hold 2 lots of short, general, and today’s position on SC2309.
If at market close the settlement price of SC2309 is determined to be 559.6 yuan/barrel, then the 5 lots filled through the TAS order will be finally traded at 558.8 yuan/barrel.
Q2: How to close out today’s position using TAS?
Assume a client has no existing position on SC2309 and submits a limit order (not TAS) for 10 lots of SC2309 as “short, general, and open”. After 4 lots are filled, the client will hold 4 lots of short, general, and today’s position on SC2309. If the client then places and executes a TAS “long, general, close today” order for 1 lot at 0 yuan/barrel, the client will hold 3 lots of short, general, and today’s position on SC2309.
If at market close the settlement price of SC2309 is determined to be 559.6 yuan/barrel, then the 1 lot filled through the TAS order will be finally traded at 559.6 yuan/barrel.
Q3: How to close out previous positions using TAS?
Assume a client holds 50 lots of long, hedging, and previous position on SC2310, and places a TAS order for 50 lots as “short, hedging, and close previous”. Once 40 lots of the TAS order are filled at a price of -1.0 yuan/barrel, the client will hold 10 lots of long, hedging, and previous position on SC2310.
If at market close the settlement price of SC2310 is determined to be 553.7 yuan/barrel, then the 40 lots filled through the TAS order will be finally traded at 552.7 yuan/barrel.
Q4:What if the TAS order is executed at a price above or below the contract’s price limit?
On a given day the lower price limit of SC2311 is 551.2 yuan/barrel. Assume a client has no existing position on SC2311 and submits a TAS “short, general, and open” order for 10 lots on that day. Once 5 lots of the order are filled at -2.0 yuan/barrel, the client will hold 5 lots of short, general, and today’s positions on SC2311.
At market close the settlement price of SC2311 is determined to be 552.9 yuan/barrel. Because the rules of the Exchange say that the transaction price of TAS orders may not exceed the upper or lower limit price of the contract, the 5 lots filled through the TAS order will be finally traded at 551.2 yuan/barrel.
4. Case Studies: Using TAS Orders for Hedging
Case Study 1:
On September 12, refinery A purchased 100,000 metric tons of medium sour crude oil from trader B, and it was agreed that the oil would be delivered on October 15-24 at the average settlement price of SC1912 in October at a discount of 7 yuan/barrel. Refinery A was scheduled to pay after market close on October 31.
As the OPEC cut production and supply went tight, refinery A believed that there was limited downside risk for SC1912. To hedge the risk of higher prices in October, refinery A decided to long 720 lots of SC1912 on September 12 at 437.9 yuan/barrel.
SC1912 began trading on October 8 after China’s national holidays. In October, refinery A closed out the positions using TAS orders at a price of 0 yuan/barrel. (100,000 metric tons of medium crude oil are equivalent to 720,000 barrels, or approximately 720 lots of futures contracts. Since there were a total of 18 trading days in October, 40,000 barrels or 40 lots were sold each trading day.)
|
Date
|
Futures Market
|
Price
(yuan/bbl)
|
Gain on Futures Positions
(yuan/bbl)
|
Barrels Calculated in the Spot Market
|
|
Sept.12
|
Long 720 lots
|
437.9
|
N/A
|
N/A
|
|
Oct.8
|
Short 40 lots using TAS
|
432.9
|
-5
|
40,000
|
|
Oct.9
|
Short 40 lots using TAS
|
440
|
2.1
|
40,000
|
|
…
|
…
|
…
|
…
|
…
|
|
Oct.16
|
Short 40 lots using TAS
|
455.7
|
17.8
|
40,000
|
|
Oct.17
|
Short 40 lots using TAS
|
448.5
|
10.6
|
40,000
|
|
…
|
…
|
…
|
…
|
…
|
|
Oct.30
|
Short 40 lots using TAS
|
454.2
|
16.3
|
40,000
|
|
Oct.31
|
Short 40 lots using TAS
|
452.2
|
14.3
|
40,000
|
|
Total
(in October)
|
Short 720 lots using TAS
|
449.57 (monthly average)
|
11.67
|
720,000
|
|
Outcome
|
The gain in the futures market is 449.57-437.9=11.67 yuan/barrel.
The settlement price was locked in to 437.9 yuan/barrel.
The actual trading price was 437.9-7=430.9 yuan/barrel.
|
|||
Case Study 2:
On September 12, refinery A purchased 100,000 metric tons of medium sour crude oil from trader B, and it was agreed that the oil would be delivered on October 15-24 at the average settlement price of SC1912 in October at a discount of 7 yuan/barrel. Refinery A was scheduled to pay after market close on October 31.
SC1912 began trading on October 8 after China’s national holidays. As the price went up, refinery A believed it was overvalued and may experience a correction later. Therefore, on October 11, refinery A decided to short the futures when the price was over 450 yuan/barrel and to lock in the price when it dropped below 450 yuan/barrel.
As shown in the table below, by using TAS orders, refinery A shorted the same amount of oil as calculated in the spot market on October 11-16 at a price of 0 yuan/barrel, and closed out on October 18-23 at 0 yuan/barrel to lock in the settlement price. (100,000 metric tons of medium crude oil are equivalent to 720,000 barrels, or approximately 720 lots of futures contracts. Since there were a total of 18 trading days in October, 40,000 barrels or 40 lots were sold or closed out each trading day.)
|
Date
|
Settlement Price
(yuan/bbl)
|
Barrels Calculated in the Spot Market
|
Futures Market
|
Gain on Futures Positions
(yuan/bbl)
|
Barrels Calculated in the spot Market after Hedging
|
|
Oct. 8
|
432.9
|
40,000
|
|
|
40,000
|
|
…
|
…
|
…
|
|
|
|
|
Oct.11
|
451.8
|
40,000
|
Short 40 lots using TAS
|
|
N/A
|
|
Oct.14
|
464.8
|
40,000
|
Short 40 lots using TAS
|
|
N/A
|
|
Oct.15
|
459.4
|
40,000
|
Short 40 lots using TAS
|
|
N/A
|
|
Oct.16
|
455.7
|
40,000
|
Short 40 lots using TAS
|
|
N/A
|
|
Oct.17
|
448.5
|
40,000
|
|
|
40,000
|
|
Oct.18
|
444.9
|
40,000
|
Close out 40 lots using TAS
|
6.9
|
80,000
|
|
Oct.21
|
446.3
|
40,000
|
Close out 40 lots using TAS
|
18.5
|
80,000
|
|
Oct.22
|
442.4
|
40,000
|
Close out 40 lots using TAS
|
17
|
80,000
|
|
Oct.23
|
444.7
|
40,000
|
Close out 40 lots using TAS
|
11
|
80,000
|
|
…
|
…
|
…
|
|
|
|
|
Oct.31
|
448.56
|
40,000
|
|
|
40,000
|
|
Total
|
449.57
（monthly average）
|
720,000
|
|
|
|
|
Outcome
|
The gain of 160 lots in the futures market is/4=13.35 yuan/barrel.
Considering the profit in the futures market, the average settlement price per barrel was brought down from 449.57 yuan to 446.6 yuan.
The actual trading price was 446.6-7=439.6 yuan/barrel.
|
||||
5. Case Study: TAS Trading in Fund Management by ETFs
On November 8, market maker A purchased one million shares of crude oil ETF from a fund manager B (the minimum purchasing volume is 500,000 shares). These shares would be effective on November 9, and be settled according to the actual buying price of from the exchange by fund manager B. On November 8, the settlement price of SC 2012 was 462.1 yuan/barrel, and thus the price of one share was 0.9242 yuan.
To avoid price fluctuations, market maker A shorted two lots of crude oil futures at 461.6 yuan/barrel on November 8. On November 9, the futures price went up by 1% to 466.7 yuan/barrel (assume that the secondary market moves simultaneously with the futures market). Market maker A sold all the EFT shares and closed out the positions on crude oil futures. Suppose that fund manager B purchased the shares from the exchange at 465 yuan/barrel, the overall profit/loss of market maker A was calculated in the table below (without considering any transaction fees):
|
Profit/Loss
(yuan)
|
Spot Market
|
Futures Market
|
||
|
|
Buy
|
465*2,000=930,000
|
Short
|
461.6*2,000=923,200
|
|
Sell
|
0.9242*1.01*1,000,000
=933,400
|
Close out
|
466.7*2,000=933,400
|
|
|
Total
|
933,400-930,000=3,400
|
923,200-933,400=-10,200
|
||
|
Outcome
|
The market maker lost 6,800 yuan in total due to the difference between the short price in the futures market and the purchasing price in the spot market.
|
|||
With TAS, market maker A could require that fund manager B should trade the SC2012 contract by using TAS orders on November 9, and market maker A would short the same amount of contracts using TAS orders at a price of 0 yuan/barrel too. Suppose that the settlement price on that day was 465.9 yuan/barrel, the overall profit/loss of market maker A is calculated in the table below (without considering any transaction fees):
|
Profit/Loss
(yuan)
|
Spot Market
|
Futures Market
|
|
|
Buy
|
465.9*2,000=931,800
|
Short
|
465.9*2,000=931,800
|
|
Sell
|
0.9242*1.01*1,000,000
=933,400
|
Close out
|
466.7*2,000=933,400
|
|
Total
|
Breakeven
|
||
TAS Guideline
Instructions on Trade at Settlement (TAS) Orders
I. Basic Rules
(1)
Trade at Settlement (TAS) is an order type that allows a trader to enter an order to buy or sell an eligible futures contract (“eligible contract”) at the current day’s settlement price or a number of tick sizes above or below the settlement price. The eligible contracts are specified by the Exchange.
(2)
TAS orders may only be matched with other TAS orders for the same contract. TAS orders are matched by the “trading volume maximization” rule during central auction and by price-time priority during continuous auction.
(3)
After TAS orders are executed, the transaction price will be calculated according to the order matching rules, and finalized after the daily settlement price of corresponding eligible contract is determined. Under no circumstances can the final transaction price exceed the price limit for that contract.
(4)
For eligible contracts, a TAS order may be indicated as “open”, “close today” or “close previous”; and “general” or “hedging”.
(5)
TAS orders cannot be attached with the fill-or-kill (FOK) or fill-and-kill (FAK) for the time being.
(6)
TAS orders are available during the central auction, the first trading session, and 10:30 a.m. to 11:30 a.m. of the daytime trading hours. At the end of the TAS trading hours, all unfilled TAS orders will be automatically canceled by the system.
II. Special Notes
(1)
The trading privileges and minimum and maximum order sizes for an eligible contract also apply to the TAS orders for that contract. For purposes of the position limit, hedging quota, and trading limit, TAS orders are calculated on an aggregated basis with other orders in the eligible contract.
(2)
If an eligible contract is trading at the price limit or TAS orders on that contract are being executed at the maximum or minimum permitted number of tick sizes, the TAS orders in the contract will not be matched by the principle of “close-out orders first” and will not affect the determination of Limit-locked Market.
(3)
Market data on eligible contracts published during the trading hours does not include the turnover or trading volume from TAS transactions, while the open interest from TAS transactions is included in the change of open interest of the eligible contracts. Statistics following market close and settlement do reflect TAS transactions in the turnover and trading volume of the corresponding contracts.
(4)
During the trading hours, the Exchange will calculate the margin to be frozen or released for TAS transactions based on the settlement price of the eligible contract of the previous trading day and the rules of larger-side margining (or portfolio margining once it is launched). During daily settlement at market close, the Exchange will calculate and collect margin on the positions established by TAS transactions based on the settlement price of the eligible contract of the current day and the rules of larger-side margining (or portfolio margining once it is launched).
III. TAS Order Examples
(1) Opening New Position – Example 1
Assume a client has no existing position on SC2308 and places a TAS order for 40 lots on SC2308 as “long, general, open”, which is then matched with an existing TAS order for short 15 lots at a price of 1.2 yuan/ barrel. As a result, the client will hold 15 lots of long, general, and today’s position on SC2308. The remaining 25 lots will be automatically canceled by the system if they cannot be matched by 11:30 a.m.
If at market close the settlement price of SC2308 is determined to be 560.7yuan/barrel, then the 15 lots filled through the TAS order will be finally traded at 561.9 yuan/barrel.
(2) Opening New Position – Example 2
Assume a client has no existing position on SC2309 and submits a TAS “short, general, open” order for 10 lots. After 5 lots are filled at a price of -0.8 yuan/barrel, the client will hold 5 lots of short, general, and today’s position on SC2309. If now the client places and executes a limit order (not TAS) for 3 lots of SC2309 as “long, general, and close today”, the client will hold 2 lots of short, general, and today’s position on SC2309.
If at market close the settlement price of SC2309 is determined to be 559.6 yuan/barrel, then the 5 lots filled through the TAS order will be finally traded at 558.8 yuan/barrel.
(3) Closing Out Today’s Position
Assume a client has no existing position on SC2309 and submits a limit order (not TAS) for 10 lots of SC2309 as “short, general, and open”. After 4 lots are filled, the client will hold 4 lots of short, general, and today’s position on SC2309. If the client then places and executes a TAS “long, general, close today” order for 1 lot at 0 yuan/barrel, the client will hold 3 lots of short, general, and today’s position on SC2309.
If at market close the settlement price of SC2309 is determined to be 559.6 yuan/barrel, then the 1 lot filled through the TAS order will be finally traded at 559.6 yuan/barrel.
(4) Closing out Previous Positions
Assume a client holds 50 lots of long, hedging, and previous position on SC2310 and submits a TAS “short, hedging, close previous” order for 50 lots. Once 40 lots of the order are filled at -1.0 yuan/barrel, the client will hold 10 lots of long, hedging, and previous position on SC2310.
If at market close the settlement price of SC2310 is determined to be 553.7 yuan/barrel, then the 40 lots filled through the TAS order will be finally traded at 552.7 yuan/barrel.
(5) TAS Orders Trading at the Price Limit
On a given day the lower price limit of SC2311 is 551.2 yuan/barrel. Assume a client has no existing position on SC2311 and submits a TAS “short, general, and open” order for 10 lots on that day. Once 5 lots of the order are filled at -2.0 yuan/barrel, the client will hold 5 lots of short, general, and today’s positions on SC2311.
At market close the settlement price of SC2311 is determined to be 552.9 yuan/barrel. Because the rules of the Exchange say that the transaction price of TAS orders may not exceed the upper or lower limit price of the contract, the 5 lots filled through the TAS order will be finally traded at 551.2 yuan/barrel.
Q&As on TAS for Crude Oil Futures
1. TAS Trading Mechanism
Q1: What is TAS?
A: TAS, short for Trade at Settlement, is an order type that allows a trader to buy or sell an eligible futures contract during specified trading hours at the current day’s settlement price or a certain number of ticks of the outright above or below that price.
A: TAS, short for Trade at Settlement, is an order type that allows a trader to buy or sell an eligible futures contract during specified trading hours at the current day’s settlement price or a certain number of ticks of the outright above or below that price.
Q2: Why does INE launch TAS orders?
A: TAS order aims to provide an efficient and effective risk management tool in the market which can lower traders’ risk management costs, so as to enhance the proportion of brick-and-mortar enterprise investors and the crude oil price influence.
For brick-and-mortar enterprises, the futures settlement price is often used as the benchmark price in spot trading. These enterprises used to place orders frequently to simulate the settlement price, which is difficult to execute as well as inefficient for hedging. TAS orders enable investors to trade at or near the settlement price during specified trading hours, which will greatly reduce the uncertainty they used to face when hedging. As a result, they can exercise better risk management easily with TAS.
A: TAS order aims to provide an efficient and effective risk management tool in the market which can lower traders’ risk management costs, so as to enhance the proportion of brick-and-mortar enterprise investors and the crude oil price influence.
For brick-and-mortar enterprises, the futures settlement price is often used as the benchmark price in spot trading. These enterprises used to place orders frequently to simulate the settlement price, which is difficult to execute as well as inefficient for hedging. TAS orders enable investors to trade at or near the settlement price during specified trading hours, which will greatly reduce the uncertainty they used to face when hedging. As a result, they can exercise better risk management easily with TAS.
In western financial markets, in addition to brick-and-mortar enterprises, institutional investors including ETFs and long-term capital management funds also use TAS for position transfers which require lower fees for hedging purposes. Moreover, it will also reduce the short-term adverse effect of position transfers to the market.
To sum up, TAS trading will enhance the hedging efficiency for entities as an efficient risk management tool, attract more diversified market participants and enhance the proportion of brick-and-mortar investors. As it is more convenient for global investors to refer to China’s futures prices, the price influence will surely be improved.
2. TAS for Crude Oil Futures
Q1: Who can place TAS orders for crude oil futures?
A: Any trader of crude oil futures can place TAS orders.
Q1: Who can place TAS orders for crude oil futures?
A: Any trader of crude oil futures can place TAS orders.
Q2: Which crude oil futures contracts are eligible for TAS orders?
A: TAS order is only available to the nearby crude oil futures contract and the three monthly contracts thereafter (hereinafter referred to as the “eligible contracts”), and will no longer be available after the market close on the eighth trading day preceding the last trading day of the relevant eligible contract.
A: TAS order is only available to the nearby crude oil futures contract and the three monthly contracts thereafter (hereinafter referred to as the “eligible contracts”), and will no longer be available after the market close on the eighth trading day preceding the last trading day of the relevant eligible contract.
Q3: What is the price quote of TAS orders for crude oil futures?
A: The price range for TAS orders is the underlying contract’s daily settlement price ± 2 yuan/barrel. TAS orders executed at above or below the contract’s price limit will be settled at the corresponding price limit.
A: The price range for TAS orders is the underlying contract’s daily settlement price ± 2 yuan/barrel. TAS orders executed at above or below the contract’s price limit will be settled at the corresponding price limit.
Q4: What are the trading hours of TAS orders for crude oil futures?
A: TAS orders for crude oil futures are available during the opening auction, the first trading session, and 10:30 a.m. to 11:30 a.m. of the daytime trading hours. At the end of the TAS trading hours, all unmatched TAS orders are automatically cancelled by the system.
A: TAS orders for crude oil futures are available during the opening auction, the first trading session, and 10:30 a.m. to 11:30 a.m. of the daytime trading hours. At the end of the TAS trading hours, all unmatched TAS orders are automatically cancelled by the system.
Q5: What are the matching rules of crude oil TAS orders?
A: TAS orders may only be matched with other TAS orders for the same contract. TAS orders are matched by the “trading volume maximization” rule during central auction and by price-time priority during continuous auction.
A: TAS orders may only be matched with other TAS orders for the same contract. TAS orders are matched by the “trading volume maximization” rule during central auction and by price-time priority during continuous auction.
Q6: What are the attributes of TAS orders for crude oil futures?
A: Same as other orders, TAS orders may be indicated as “open”, “close today”, or “close previous”; and “general” or “hedging.”
Q7: Can other properties be attached with a TAS order for crude oil futures?
A: TAS orders cannot be attached with the properties of fill-or-kill (FOK) or fill-and-kill (FAK) for the time being.
Q8: How will INE collect the margin of a TAS trade for crude oil futures?
A: During the trading hours, INE will calculate the margin to be frozen or released for a TAS trade based on the previous settlement price of the underlying contract, and will include the margin into the larger-side margining.
At the end of a trading day, INE will collect the margin for a TAS trade based on that day’s settlement price of the underlying contract, and will include the margin into the larger-side margining.
Q9: How will INE collect the transaction fees of a TAS trade for crude oil futures?
A: Please refer to the provisions on TAS-eligible crude oil futures contracts.
Q10: How to access the market data of TAS trades for crude oil futures?
A: Traders can find relevant market data on the official websites and member service systems of SHFE and INE, or through the apps of other data providers. Market data of TAS-eligible contracts published during trading hours does not include turnover and trading volume from TAS transactions. Statistics following market close and settlement do reflect TAS transactions in the turnover and trading volume of the corresponding contracts.
Q11: If the eligible contract is traded only by TAS order, how would the daily settlement price be determined?
A: If the eligible contract is traded only by TAS order, it will be considered as having not been executed on that day, and its daily settlement price will be determined in the same manner in accordance with the Clearing Rules of the Shanghai International Energy Exchange as for futures contracts without an execution price. For example, if the settlement price for SC2010 is $305.0/bbl and a TAS sell order is matched at $1.2/bbl, then the TAS order will be settled at $306.2/bbl. TAS orders executed at above or below the contract’s price limit will be settled at the corresponding price limit.
3. TAS Order Examples
Q1: How to open positions using TAS?
A: Example 1:
Assume a client has no existing position on SC2308 and places a TAS order for 40 lots on SC2308 as “long, general, open”, which is then matched with an existing TAS order for short 15 lots at a price of 1.2 yuan/barrel. As a result, the client will hold 15 lots of long, general, and today’s position on SC2308. The remaining 25 lots will be automatically canceled by the system if they cannot be matched by 11:30 a.m.
If at market close the settlement price of SC2308 is determined to be 560.7 yuan/barrel, then the 15 lots filled through the TAS order will be finally traded at 561.9 yuan/barrel.
Example 2:
Assume a client has no existing position on SC2309 and submits a TAS “short, general, open” order for 10 lots. After 5 lots are filled at a price of -0.8 yuan/barrel, the client will hold 5 lots of short, general, and today’s position on SC2309. If now the client places and executes a limit order (not TAS) for 3 lots of SC2309 as “long, general, and close today”, the client will hold 2 lots of short, general, and today’s position on SC2309.
If at market close the settlement price of SC2309 is determined to be 559.6 yuan/barrel, then the 5 lots filled through the TAS order will be finally traded at 558.8 yuan/barrel.
Q2: How to close out today’s position using TAS?
Assume a client has no existing position on SC2309 and submits a limit order (not TAS) for 10 lots of SC2309 as “short, general, and open”. After 4 lots are filled, the client will hold 4 lots of short, general, and today’s position on SC2309. If the client then places and executes a TAS “long, general, close today” order for 1 lot at 0 yuan/barrel, the client will hold 3 lots of short, general, and today’s position on SC2309.
If at market close the settlement price of SC2309 is determined to be 559.6 yuan/barrel, then the 1 lot filled through the TAS order will be finally traded at 559.6 yuan/barrel.
Q3: How to close out previous positions using TAS?
Assume a client holds 50 lots of long, hedging, and previous position on SC2310, and places a TAS order for 50 lots as “short, hedging, and close previous”. Once 40 lots of the TAS order are filled at a price of -1.0 yuan/barrel, the client will hold 10 lots of long, hedging, and previous position on SC2310.
If at market close the settlement price of SC2310 is determined to be 553.7 yuan/barrel, then the 40 lots filled through the TAS order will be finally traded at 552.7 yuan/barrel.
Q4:What if the TAS order is executed at a price above or below the contract’s price limit?
On a given day the lower price limit of SC2311 is 551.2 yuan/barrel. Assume a client has no existing position on SC2311 and submits a TAS “short, general, and open” order for 10 lots on that day. Once 5 lots of the order are filled at -2.0 yuan/barrel, the client will hold 5 lots of short, general, and today’s positions on SC2311.
At market close the settlement price of SC2311 is determined to be 552.9 yuan/barrel. Because the rules of the Exchange say that the transaction price of TAS orders may not exceed the upper or lower limit price of the contract, the 5 lots filled through the TAS order will be finally traded at 551.2 yuan/barrel.
4. Case Studies: Using TAS Orders for Hedging
Case Study 1:
On September 12, refinery A purchased 100,000 metric tons of medium sour crude oil from trader B, and it was agreed that the oil would be delivered on October 15-24 at the average settlement price of SC1912 in October at a discount of 7 yuan/barrel. Refinery A was scheduled to pay after market close on October 31.
As the OPEC cut production and supply went tight, refinery A believed that there was limited downside risk for SC1912. To hedge the risk of higher prices in October, refinery A decided to long 720 lots of SC1912 on September 12 at 437.9 yuan/barrel.
SC1912 began trading on October 8 after China’s national holidays. In October, refinery A closed out the positions using TAS orders at a price of 0 yuan/barrel. (100,000 metric tons of medium crude oil are equivalent to 720,000 barrels, or approximately 720 lots of futures contracts. Since there were a total of 18 trading days in October, 40,000 barrels or 40 lots were sold each trading day.)
|
Date
|
Futures Market
|
Price
(yuan/bbl)
|
Gain on Futures Positions
(yuan/bbl)
|
Barrels Calculated in the Spot Market
|
|
Sept.12
|
Long 720 lots
|
437.9
|
N/A
|
N/A
|
|
Oct.8
|
Short 40 lots using TAS
|
432.9
|
-5
|
40,000
|
|
Oct.9
|
Short 40 lots using TAS
|
440
|
2.1
|
40,000
|
|
…
|
…
|
…
|
…
|
…
|
|
Oct.16
|
Short 40 lots using TAS
|
455.7
|
17.8
|
40,000
|
|
Oct.17
|
Short 40 lots using TAS
|
448.5
|
10.6
|
40,000
|
|
…
|
…
|
…
|
…
|
…
|
|
Oct.30
|
Short 40 lots using TAS
|
454.2
|
16.3
|
40,000
|
|
Oct.31
|
Short 40 lots using TAS
|
452.2
|
14.3
|
40,000
|
|
Total
(in October)
|
Short 720 lots using TAS
|
449.57 (monthly average)
|
11.67
|
720,000
|
|
Outcome
|
The gain in the futures market is 449.57-437.9=11.67 yuan/barrel.
The settlement price was locked in to 437.9 yuan/barrel.
The actual trading price was 437.9-7=430.9 yuan/barrel.
|
|||
Case Study 2:
On September 12, refinery A purchased 100,000 metric tons of medium sour crude oil from trader B, and it was agreed that the oil would be delivered on October 15-24 at the average settlement price of SC1912 in October at a discount of 7 yuan/barrel. Refinery A was scheduled to pay after market close on October 31.
SC1912 began trading on October 8 after China’s national holidays. As the price went up, refinery A believed it was overvalued and may experience a correction later. Therefore, on October 11, refinery A decided to short the futures when the price was over 450 yuan/barrel and to lock in the price when it dropped below 450 yuan/barrel.
As shown in the table below, by using TAS orders, refinery A shorted the same amount of oil as calculated in the spot market on October 11-16 at a price of 0 yuan/barrel, and closed out on October 18-23 at 0 yuan/barrel to lock in the settlement price. (100,000 metric tons of medium crude oil are equivalent to 720,000 barrels, or approximately 720 lots of futures contracts. Since there were a total of 18 trading days in October, 40,000 barrels or 40 lots were sold or closed out each trading day.)
|
Date
|
Settlement Price
(yuan/bbl)
|
Barrels Calculated in the Spot Market
|
Futures Market
|
Gain on Futures Positions
(yuan/bbl)
|
Barrels Calculated in the spot Market after Hedging
|
|
Oct. 8
|
432.9
|
40,000
|
|
|
40,000
|
|
…
|
…
|
…
|
|
|
|
|
Oct.11
|
451.8
|
40,000
|
Short 40 lots using TAS
|
|
N/A
|
|
Oct.14
|
464.8
|
40,000
|
Short 40 lots using TAS
|
|
N/A
|
|
Oct.15
|
459.4
|
40,000
|
Short 40 lots using TAS
|
|
N/A
|
|
Oct.16
|
455.7
|
40,000
|
Short 40 lots using TAS
|
|
N/A
|
|
Oct.17
|
448.5
|
40,000
|
|
|
40,000
|
|
Oct.18
|
444.9
|
40,000
|
Close out 40 lots using TAS
|
6.9
|
80,000
|
|
Oct.21
|
446.3
|
40,000
|
Close out 40 lots using TAS
|
18.5
|
80,000
|
|
Oct.22
|
442.4
|
40,000
|
Close out 40 lots using TAS
|
17
|
80,000
|
|
Oct.23
|
444.7
|
40,000
|
Close out 40 lots using TAS
|
11
|
80,000
|
|
…
|
…
|
…
|
|
|
|
|
Oct.31
|
448.56
|
40,000
|
|
|
40,000
|
|
Total
|
449.57
（monthly average）
|
720,000
|
|
|
|
|
Outcome
|
The gain of 160 lots in the futures market is/4=13.35 yuan/barrel.
Considering the profit in the futures market, the average settlement price per barrel was brought down from 449.57 yuan to 446.6 yuan.
The actual trading price was 446.6-7=439.6 yuan/barrel.
|
||||
5. Case Study: TAS Trading in Fund Management by ETFs
On November 8, market maker A purchased one million shares of crude oil ETF from a fund manager B (the minimum purchasing volume is 500,000 shares). These shares would be effective on November 9, and be settled according to the actual buying price of from the exchange by fund manager B. On November 8, the settlement price of SC 2012 was 462.1 yuan/barrel, and thus the price of one share was 0.9242 yuan.
To avoid price fluctuations, market maker A shorted two lots of crude oil futures at 461.6 yuan/barrel on November 8. On November 9, the futures price went up by 1% to 466.7 yuan/barrel (assume that the secondary market moves simultaneously with the futures market). Market maker A sold all the EFT shares and closed out the positions on crude oil futures. Suppose that fund manager B purchased the shares from the exchange at 465 yuan/barrel, the overall profit/loss of market maker A was calculated in the table below (without considering any transaction fees):
|
Profit/Loss
(yuan)
|
Spot Market
|
Futures Market
|
||
|
|
Buy
|
465*2,000=930,000
|
Short
|
461.6*2,000=923,200
|
|
Sell
|
0.9242*1.01*1,000,000
=933,400
|
Close out
|
466.7*2,000=933,400
|
|
|
Total
|
933,400-930,000=3,400
|
923,200-933,400=-10,200
|
||
|
Outcome
|
The market maker lost 6,800 yuan in total due to the difference between the short price in the futures market and the purchasing price in the spot market.
|
|||
With TAS, market maker A could require that fund manager B should trade the SC2012 contract by using TAS orders on November 9, and market maker A would short the same amount of contracts using TAS orders at a price of 0 yuan/barrel too. Suppose that the settlement price on that day was 465.9 yuan/barrel, the overall profit/loss of market maker A is calculated in the table below (without considering any transaction fees):
|
Profit/Loss
(yuan)
|
Spot Market
|
Futures Market
|
|
|
Buy
|
465.9*2,000=931,800
|
Short
|
465.9*2,000=931,800
|
|
Sell
|
0.9242*1.01*1,000,000
=933,400
|
Close out
|
466.7*2,000=933,400
|
|
Total
|
Breakeven
|
||
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