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Delivery Rules of the Shanghai International Energy Exchange

Date:07 19, 2016 Author:Amil


Chapter 1 General Provisions

Article 1 To ensure the normal operations of the futures delivery in the Shanghai International Energy Exchange (“the Exchange”) strengthen the management of the Designated Delivery Warehouses, standard warrant and commodity registration, regulate the delivery operations, these Rules are formulated according to the General Exchange Rules of the Shanghai International Energy Exchange and the relevant detailed implementing rules.

Article 2 The Exchange’s delivery operations shall abide by these Rules. The participants in the delivery operations such as the Exchange, Members, Overseas Special Participants, Overseas Intermediaries, Clients, Designated Delivery Warehouses and Designated Inspection Agencies shall abide by these Rules.

Article 3 The delivery of futures contract may adopt the method of the physical delivery or other delivery methods according to the provisions prescribed by the Exchange.

Article 4 The physical delivery refers to the settlement of open positions of the futures contract by the buy-side and sell-side through the transfer of the ownership of the underlying asset of the contract in accordance with the rules and procedures of the Exchange.

The physical delivery of the futures contract is divided into bonded delivery and duty-paid delivery according to different duty payment statuses of the delivery commodities. Bonded delivery means the physical delivery of the underlying commodity of a futures contract in bonded status within the special regions of the customs or the bonded area. Duty-paid delivery means the physical delivery of the underlying commodity of a futures contract which is customs cleared, and has paid up taxes such as the customs duties and VATs.

The physical delivery of the futures contract is divided into warehouse delivery, factory delivery and other delivery methods according to different natures of the delivery venues. Warehouse delivery is a process of physical delivery where the buyer and the seller perform delivery in accordance with the required procedures by transferring the possession of warehouse standard warrants. Factory delivery is a process of physical delivery where the buyer and the seller perform delivery in accordance with the required procedures by transferring the possession of factory standard warrants.

Article 5 The Designated Delivery Warehouses include the warehouses and the factories. Warehouse means a facility of a licensed commodities storage enterprise which has been approved and designated by the Exchange for the physical delivery of a certain commodity futures. Factory means a facility of a producer which have been approved and designated by the Exchange for the physical delivery of a certain commodity futures.

The Designated Delivery Warehouses shall be announced separately upon the verification and approval of the Exchange.

Article 6 The standard warrant refers to the receipt entitling the holder thereof to take delivery of the physical commodity issued by the Designated Delivery Warehouse in accordance with the procedures prescribed by the Exchange, and is generated in the standard warrant system of the Exchange. The other receipts entitling physical delivery except the standard warrants are classified as non-standard warrants.

The standard warrant is divided into the bonded standard warrant and duty-paid standard warrant according to different duty payment statuses of the futures commodities.

The standard warrant is divided into warehouse standard warrant and factory standard warrant according to different natures of the delivery venues.

Article 7 For physical delivered futures contracts, delivery for all the open positions at expiry shall be conducted according to the standard delivery procedures, whereas the delivery of undue contracts may be conducted according to the procedures of Exchange for Physical (hereinafter referred to as the “EFP”).

Article 8 The Members shall perform the physical delivery with the Exchange directly.

The Members’ Clients, Overseas Special Participants who authorize Members to clear and Overseas Intermediaries who authorize Members to trade and clear (the aforementioned Clients, Overseas Special Participants and Overseas Intermediaries are collectively referred to as the “Clearing and Delivery Principals”) shall perform the physical delivery via the Members of the Exchange.

The Clients of Overseas Special Brokerage Participants and Overseas Intermediaries shall perform the physical delivery via those Overseas Special Brokerage Participants and Overseas Intermediaries respectively.

Unless otherwise prescribed by the Exchange, the Clients who cannot issue or receive the invoices stipulated by the Exchange shall not make or take delivery.

Article 9 The grades and quality specifications shall be set forth in the futures contract.

Article 10 The Exchange may manage the delivery commodities according to relevant provisions of registered commodities.

Article 11 The Exchange may charge a delivery fee from the buyer and the seller of physical delivery. One may refer to the specific provisions of the corresponding listed futures contracts in these Rules for the fee standard.

Chapter 2 Standard Delivery

Article 12 The physical delivery of the expired futures contract shall be completed within the delivery period provided by the futures contract. The delivery period means the five (5) consecutive days immediately after the last trading day of the futures contract. These aforementioned five (5) consecutive trading days are called the First, Second, Third, Fourth and Fifth Delivery Day respectively. The Fifth Delivery Day is the last delivery day.

1. The First Delivery Day (Application)

(1) Buyers submit intentions. Buyers submit a notice of intent to deliver the required commodities to the Exchange via the standard warrant system, specifying information such as the products, quantities, the names of the Designated Delivery Warehouses, etc.

(2) Sellers submit standard warrants. Sellers submit the valid standard warrants for which storage fees have been paid in full to the Exchange via the standard warrant system. Sellers are responsible for the storage fees before the Fifth Delivery Day (including that day), while the buyers are responsible for the storage fees after the Fifth Delivery Day.

2. The Second Delivery Day (Matching)

The Exchange performs the matching and allocation of the standard warrants taking into account the existing standard warrants in accordance with the principles of “time priority, integral quantity, nearest matching rule, and overall arrangement”.

The Exchange allocates the standard warrants that cannot be used for the physical delivery of the futures contract in the next month to the buyers according to the proportion of each buyer’s delivery in the total delivery volume of the month.

3. The Third Delivery Day (Payment and obtaining the warrant)

(1) Buyers pay and obtain the warrants. Buyers make the payment to the Exchange before 14:00 on the Third Delivery Day and obtain the standard warrants.

(2) Sellers receive the payment. The Exchange transfers the payment to the sellers before 16:00 on the Third Delivery Day. This time limit may be extended by the Exchange under some special circumstances.

4. The Fourth and Fifth Delivery Day (Submitting invoices and returning margin)

Sellers submit all the invoices corresponding to the delivery commodities to the Exchange. The format and content of the invoices shall comply with the provisions of the Exchange. Other matters regarding the returning of the margin and the submission of the invoices shall abide by the relevant provisions of the Clearing Rules of the Shanghai International Energy Exchange.

Article 13 When the Members perform the physical delivery at the Exchange, the standard warrant shall be transferred in the following order:

1. The sell-side Members submit the standard warrants to the Exchange.

2. The Exchange allocates the standard warrants to the buy-side Members.

Article 14 When the Clearing and Delivery Principals perform the physical delivery in the Exchange, the standard warrant shall be transferred in the following order:

1. The sell-side Members’ Clearing and Delivery Principals endorses the standard warrants to the sell-side Members to perform the physical delivery.

2. The sell-side Members submit the standard warrants to the Exchange.

3. The Exchange allocates the standard warrants to the buy-side Members.

4. The buy-side Members allocate the standard warrants to the Clearing and Delivery Principals.

The buy-side Members shall allocate the standard warrants that are allocated to them to their Clearing and Delivery Principals before the last delivery day (including that day). The Overseas Special Brokerage Participants or Overseas Intermediaries shall fix a time for allocating the standard warrants with the buy-side Members, and re-allocate the standard warrants to the Clients before the last delivery day (including that day). The buy-side Members or Overseas Special Brokerage Participants shall promptly report the reasons to the Exchange when they fail to allocate the standard warrants within the prescribed time.

The Clients shall comply with the third clause of the Article 8 during the circulation procedures of the standard warrants when their Overseas Special Brokerage Participants and Overseas Intermediaries conduct the physical delivery formalities.

Article 15 The circulation procedures of the Members’ invoices are as follows:

1. The sell-side Members issue the invoices to the Exchange.

2. The Exchange issues the invoices to the buy-side Members.

Article 16 The circulation procedures of the invoices of the Clearing and Delivery Principals are as follows:

1. The Clearing and Delivery Principals of the sell-side Members issue the invoices to the sell-side Members.

2. The sell-side Members issue the invoices to the Exchange.

3. The Exchange issues the invoices to the buy-side Members.

4. The buy-side Members issue the invoices to their Clearing and Delivery Principals.

When the Overseas Special Brokerage Participants or Overseas Intermediaries perform the formalities of the physical delivery for their Clients, they shall directly issue or receive the invoices to or from the Members that provide settlement services to them; the Clients shall issue or receive the invoices by referring to the third clause of the Article 8.

Article 17 Any “loss compensation” or “overfill and underfill” that occurs within the range allowed by a certain futures contract shall abide by the specific provisions in the section for the corresponding listed futures contract in these Rules.

Article 18 The final settlement price of a futures contract is the benchmark price for the delivery of such futures contract and shall abide by the specific provisions in the section for the corresponding listed futures contract in these Rules.

At the time of delivery settlement, the buyer and seller shall calculate payment base on the final settlement price of the futures contract and add or deduct premiums or discounts determined by the Exchange according to the different grades, qualities, places of production, delivery venues, etc.

Chapter 3 Exchange of Futures for Physicals

Article 19 The exchange of futures for physicals, or the EFP is the process that the buyers and the sellers who hold opposite positions of futures contract expiring in the same month reach an agreement through negotiation to, upon approval of the Exchange, tender a notice of EFP to have their respective positions in such contract closed out by the Exchange at the price that is fixed by the Exchange, and exchange, at the price mutually agreed upon, the warrant or bill of lading of the underlying commodity which has a quantity equivalent to, is identical to or similar with, and has the same direction with the underlying futures contract.

Article 20 The EFP application period is from the listing day of the futures contract proposed for the EFP to the second trading day (including that day) prior to the last trading day of the delivery month.

Article 21 The Members, Overseas Special Participants, Overseas Intermediaries and Clients may announce their EFP intentions via the Exchange’s standard warrant system. The contents of the announcements shall include: the Clients’ codes, the product, the contract month, the directions of the transaction, the delivery methods of the EFPs, quantities, the contact information, etc. The buyers and sellers may reach an agreement on their own initiative according to the EFP intention published by the Exchange.

Article 22 After the buyers and sellers who hold opposite positions in the same delivery month of a futures contract reach the agreement, either party may submit the EFP application to the Exchange via the standard warrant system before 14:00 of any trading day (the application day) within the EFP application period, and perform the EFPs upon the approval of the Exchange.

The Members, Overseas Special Participants, Overseas Intermediaries and Clients shall perform the EFPs according to the procedures prescribed in the Article 8 of these Rules.

Article 23 If standard warrants are used for the EFPs and the EFPs is settled via the Exchange, the EFP application shall be submitted by the Members to the Exchange.

The operational procedures that the Clearing and Delivery Principals use the standard warrants on the EFPs and settle the EFPs via the Exchange are as follows:

1. The sell-side Members’ Clearing and Delivery Principals authorize the standard warrants to sell-side Members to perform the EFPs.

2. The sell-side Members submit the standard warrants to the Exchange within the prescribed time.

3. The exchange allocates the standard warrants to the buy-side Members.

4. After the buy-side Members make payment, the Exchange releases the standard warrants and allocate them to the buy-side Members, and transfer the payment to the sell-side Members.

5. The buy-side Members allocate the standard warrants to their Clearing and Delivery Principals.

The buy-side Members shall allocate the standard warrants to their Clearing and Delivery Principals within three (3) working days after they receive them. The Overseas Special Brokerage Participants or Overseas Intermediaries shall fix a time for allocating the standard warrants with the buy-side Members, and re-allocate the standard warrants to their Clients within three (3) working days after they receive them. The buy-side Members or Overseas Special Brokerage Participants shall promptly report the reasons to the Exchange when they fail to allocate the standard warrants within the prescribed time.

The Clients of Overseas Special Brokerage Participants or Overseas Intermediaries shall perform the EFPs according to the procedures prescribed in the third clause of the Article 8 of these Rules.

Article 24 The EFPs are applicable to the previous positions of all listed futures contract of the Exchange but not applicable to the new positions opened on the application day.

Article 25 The final settlement price of the EFPs is the price agreed by the buyer and the seller, while in case the bonded standard warrant is used and the settlement is conducted through the Exchange, the final settlement price of the EFPs shall be calculated according to the specific provisions in the section of the corresponding listed futures contract in these Rules.

Article 26 The Exchange shall close the positions of the futures contract of the corresponding delivery month held by buyer and seller tendering the EFP, at the settlement price of the contract of the delivery month corresponding to the trading day immediately before the application day, before 15:00 of the application day.

Article 27 When the standard warrants are used for the EFPs and the settlement is conducted via the Exchange, the trading margin shall be calculated according to the settlement price of the contract of the delivery month corresponding to the trading day immediately before the application day. The exchange of the payment for goods and the standard warrants shall be completed in the Exchange within a time limit stipulated by the buyer and seller.

When the standard warrants are used for the EFPs and the settlement is conducted directly between the buyer and seller, they shall make payment on their own, and handle the standard warrants according to the procedures for the private settlement of standard warrants transferred outside the Exchange prescribed in these Rules, or deliver the standard warrants on their own after they take delivery of goods.

Article 28 When the standard warrants are used on the EFPs and the settlement is conducted via the Exchange, the seller shall submit the invoices to the Exchange within five (5) trading days immediately after the formalities exchanging the payment for goods and the standard warrants. If the seller submits the invoices before 14:00, the Exchange shall return the corresponding margin at the time of the settlement of the day to the seller after its verification. If the seller submits the invoices after 14:00, the Exchange shall return the corresponding margin at the time of the settlement on the next trading day to the seller after its verification. After receiving the invoices from the seller, the Exchange shall issue the invoices to the buyer on the next trading day. The seller shall abide by the relevant provisions of the Clearing Rules of the Shanghai International Energy Exchange, if he fails to submit the invoices within the prescribed time.

Article 29 All delivery payments of the EFP trades settle through the Exchange shall be handled through internal transfer, bank transfer, etc.

Article 30 When the standard warrants are used for the EFPs and the settlement is conducted via the Exchange, and the delivery is not completed within the prescribed time, the relevant rules of delivery default shall be abided by. If the disputes occur on the quality of the delivered goods, the buyer shall submit a written complaint together with the quality inspection report issued by the Exchange’s Designated Inspection Agencies within ten (10) working days after its issuance.

Article 31 If the non-standard warrants are used for the EFPs, the buyer and the seller shall abide by the relevant laws and regulations, and provide the relevant agreement for sale and purchase, the non-standard warrants and other materials. The payment for goods, the non-standard warrants and the invoices shall be transferred directly between the buyer and the seller. The disputes regarding the quality of the delivered goods of non-standard warrant shall be coordinated and handled by the relevant Members, Overseas Special Participants and Overseas Intermediaries. The Exchange will be relieved from any responsibilities of guaranty for the performance of the contract.

Article 32 The non-bona fide EFPs shall be handled according to the relevant provisions of the Enforcement Rules of the Shanghai International Energy Exchange.

Article 33 The Exchange shall promptly announce the relevant information regarding the EFPs.

Chapter 4 Warehouse Delivery

Article 34 Before applying for the issuance of warehouse standard warrants, the owners of the commodity shall submit the load-in application to the Exchange. The load-in application shall specify information including the products, the quantities, the names of the owners, the proposed load-in dates and names of the proposed Designated Delivery Warehouses, and provide various documents and certificates.

The Members, Overseas Special Participants, Overseas Intermediaries and Clients shall perform the load-in application according to the procedures prescribed by the Article 8 of these Rules.

The information for the load-in application shall be true.

Article 35 The Exchange shall consider the willingness of the owners and the storage capacity, and decide whether to approve the load-in application and the valid load-in period within three (3) trading days after it receives the materials for the load-in application that meets the stipulated requirements. Upon the approval of the Exchange, the owners shall ship the commodities to the Designated Delivery Warehouses within the valid load-in period. The valid load-in period comes into effect on the day of the Exchange’s approval. The Exchange may adjust the valid load-in period according to different circumstances. The valid load-in period shall abide by the specific provisions in the section for the corresponding listed futures contract in these Rules.

Standard warrants shall not be issued for the commodities of which the load-in is not approved or is not completed within the stipulated valid period.

Article 36 The owners shall pay a deposit for load-in according to the standards specified in the section for the corresponding listed futures contract in these Rules. The deposit for load-in shall be transferred from the Members’ clearing reserve.

Following the completion of load-in and the warehouse standard warrants are issued to the owner of the commodity, the Exchange shall return the deposit for load-in to the Members’ clearing reserve. In case of partial load-in, the deposit in proportion to the quantity difference shall be paid to the Designated Delivery Warehouses as compensation; in case the load-in is not performed, all the deposit for load-in shall be paid to the Designated Delivery Warehouses as compensation. If the actual load-in quantity falls within the allowed tolerance of the futures contract, all the deposit for load-in shall be returned.

If the owners are the Clearing and Delivery Principals, the deposit shall be transferred from and returned to the clearing reserve of the Members that provide settlement services for them by the Exchange.

Article 37 The load-in and load-out inspection of futures commodities shall follow the inspection standards and methods specified in the inspection rules corresponding to the futures products and conducted by the Designated Inspection Agencies.

The seller shall select the inspection agency among the Exchange’s Designated Inspection Agencies at the time of load-in, while the buyer shall select among the Exchange’s Designated Inspection Agencies at the time of load-out. Should the Designated Delivery Warehouses have a dispute against the inspection agency selected by the buyer or the seller, they may discuss with the buyer or the seller to select another Designated Inspection Agency. If the negotiation fails, the Designated Delivery Warehouse may appeal to the Exchange to select a Designated Inspection Agency.

The buyer, the seller and the Designated Delivery Warehouses shall cooperate with the Designated Inspection Agencies for its inspection work. The inspection fees shall be paid by the seller at the time of load-in, and the buyer at the time of load-out, unless otherwise prescribed in these Rules.

Article 38 The minimum quantity of load-in and load-out for the futures commodities shall follow the specific requirements in the section for the corresponding listed futures contract in these Rules. The transportation instruments shall follow the requirements on loading, measurement management, etc. of the ports, the terminals, the Designated Delivery Warehouses, etc. and strictly observe the safety operation standards of the Designated Delivery Warehouses.

Article 39 The Designated Delivery Warehouses shall verify the commodities and the relevant documents and certificates upon the arrival of the futures commodities.

The load-in futures commodities shall be shipped directly from the port of place of origin, or from the registered producer to the Designated Delivery Warehouses, unless otherwise prescribed by the Exchange. No blending shall be allowed during the loading and storage.

The Designated Delivery Warehouses have rights to supervise and manage the transportation of the commodities.

Article 40 The load-in inspection of futures commodities is divided into the quality inspection and the quantity inspection.

1. The load-in quality inspection

Before the load-in, the Designated Inspection Agency shall take samples of the commodities from the ship tanks or other transport containers (Sample A) and from the Designated Delivery Warehouse (Sample B) and seal them. Sample A shall be divided into Sample A1 and Sample A2, where Sample A1 shall contain multiple samples taken from each single ship tank or single container of the load-in commodities and Sample A2 shall contain the proportioning mixture of all the samples of A1. After load-in, the Designated Inspection Agency shall take a sample from the depot of the Designated Delivery Warehouse (Sample C), conduct the inspection, and issue an inspection report. If Sample C passes the inspection, it means the commodities delivered by the owner are qualified. The quality inspection report of the delivered commodities submitted by the owner shall be the inspection report based on Sample C.

If Sample C fails the inspection, the Designated Inspection Agency shall conduct inspection on Sample A and Sample B, which might lead to one of the following four scenarios:

(1) If Sample A passes but Sample B fails the inspection, it means the commodities delivered by the owner are qualified. The Designated Delivery Warehouse shall be liable for the disqualification of the commodities in the warehouse after the load-in. The inspection fees for Sample A and Sample B shall be borne by the Designated Delivery Warehouse.

(2) If Sample B passes but Sample A fails the inspection, it means the commodities delivered by the owner are disqualified. The owner shall be liable for the disqualification of the commodities in the warehouse after the load-in. The inspection fees for Sample A and Sample B shall be borne by the owner.

(3) If both Sample A and B pass the inspection, it means the commodities delivered by the owner are qualified. The Designated Delivery Warehouse shall be liable for the disqualification of the commodities in the warehouse after the load-in. The inspection fees for Sample A and Sample B shall be borne by the Designated Delivery Warehouse.

(4) If both Sample A and B fail the inspection, it means the commodities delivered by the owner and those originally in the warehouse are both disqualified. Both the owner and the Designated Delivery Warehouse shall be liable for the disqualification of the commodities in the warehouse after the load-in. The inspection fees for Sample A shall be borne by the owner and that for Sample B shall be borne by the Designated Delivery Warehouse.

Under any of the above-mentioned four scenarios, if either of Sample A1 or Sample A2 is disqualified, Sample A is considered disqualified. The quality inspection reports submitted by the owner are all inspection reports for Sample A.

2. The quality inspection shall be subject to the quality inspection report issued by the Designated Inspection Agency. Only if the quality inspection report satisfies the Exchange’s quality standards of the delivery commodities, the standard warrants can be generated. The quantity inspection shall be subject to the quantity inspection report issued by the Designated Inspection Agency, and abide by the specific provisions in the section for the corresponding listed futures contract in these Rules.

3. The owners’ liabilities for quality

The owners shall ensure that the delivered commodities reach the quality standards provided by the Exchange. If the owner’s delivered commodities do not reach the quality standards which makes other futures commodities non-deliverable (not meeting the quality standards provided by the Exchange), the owners shall bear full liabilities.

4. Owner’s overseeing load-in

The owners shall oversee the load-in of commodities into the Designated Delivery Warehouses. Otherwise, the owner is deemed to agree with the inspection results issued by the Designated Inspection Agencies.

Article 41 Necessary documents and certificates of delivery such as the quality certificate and the inspection certificate shall be provided together with the delivery commodities of the futures contract. Such documents and certificates shall follow the specific requirements in the section for the corresponding listed futures contract in these Rules.

Article 42 Upon completing the load-in and passing the inspection, the Designated Delivery Warehouses shall input the load-in inspection results into the standard warrant system, the owners shall apply to the Exchange via the Members, Overseas Special Participants or Overseas Intermediaries for standard warrants issuance. The Members, Overseas Special Participants or Overseas Intermediaries shall file the necessary documents and certificates of delivery to the Exchange for verification. Upon passing the verification, the Designated Delivery Warehouses will be notified to issue the standard warrants in the standard warrant system.

Article 43 After the Designated Delivery Warehouses receive the Exchange’s instructions, they shall issue the standard warrants in the standard warrant system according to the following requirements:

1. The quantities of the standard warrants as well as the relevant documents and certificates satisfy the requirements on load-in application of the Exchange;

2. The conditions of the commodities indicated in the standard warrants such as the quality, the package, etc. are consistent with the Exchange’s relevant regulations.

Article 44 When the holder of standard warrant takes delivery of goods, the Designated Delivery Warehouses shall deliver the goods after verifying the standard warrant is accurate. The owner may take delivery of goods by himself, entrust others to take delivery of goods, or entrust the Designated Delivery Warehouses to take and deliver the goods.

When the holder of standard warrant takes delivery of goods, he shall entrust the Exchange’s Designated Inspection Agency to perform an on-site inspection of the quality and quantity of the delivery goods. The quality and quantity of the load-out commodities shall be subject to the inspection report issued by the Designated Inspection Agency, and abide by the specific provisions in the section for the corresponding listed futures contract in these Rules. Samples shall be taken from the Designated Delivery Warehouse for quality inspection. When the holder of standard warrant does not entrust the Exchange’s Designated Inspection Agency to perform the inspection, it is deemed that the Designated Delivery Warehouse has made delivery correctly. The Designated Delivery Warehouse and the Exchange will no longer accept request for dispute resolution against the delivered commodities.

When the holder of the standard warrant has any dispute against the delivered commodities, he shall apply in written request for dispute resolution to the Designated Delivery Warehouse within ten (10) working days after the Designated Inspection Agency issues the inspection reports. The quality inspection conclusion issued by the Designated Inspection Agencies shall be provided with the application. If the application is not submitted within the specified time period, it is deemed that no dispute against the delivered commodities exists. The Designated Delivery Warehouse and the Exchange will no longer accept request for dispute resolution against the delivered commodities.

Article 45 If the holder of the bonded standard warrants need to make customs declaration in order to import the commodities, the relevant State regulatory provisions for the bonded commodities shall be followed.

The warrant shall be cancelled once the warrant holder is issued the bonded delivery settlement statement and the bonded standard warrant list for the purpose of customs declaration. The commodities for the customs declaration and their quantities shall be consistent with the bonded delivery settlement statement and the bonded standard warrant list.

Article 46 The transportation of the delivery commodities in and out of the Designated Delivery Warehouses shall be arranged by the buyers and the sellers.

Article 47 The Designated Delivery Warehouses shall undertake full responsibilities for the quality, safety, and other aspects of the stored goods after the goods pass the inspection and are loaded into the warehouse and before they are loaded out of the warehouse. The Exchange shall examine and verify the commodities in stock annually.

Chapter 5 Factory Delivery

Article 48 The factory shall apply to the Exchange for permission before issuing a factory standard warrant. The application shall include the product name, the name of the institution, the name of the owner and the proposed quantity of the applied factory standard warrant to be issued, etc.

Article 49 Before or at the time when the factory submits an application for issuing the factory standard warrant, the factory shall, according to the Exchange relevant rules, provide the performance bonds from the banks which correspond with the quantities of the factory standard warrant to be issued and are recognized by the Exchange, or provide other guarantees recognized by the Exchange.

When the futures contract prices undergo major fluctuations, the Exchange may require the factories to adjust their guarantees according to the market changing situations.

Article 50 When the approved factory storage capacity is available and the prescribed guarantee is provided, the Exchange shall decide within 3 trading days after receiving the prescribed application materials whether to approve the factory to issue the factory standard warrants.

Article 51 The approved factory storage capacity means the maximum quantities of the factory standard warrants that the factory may issue (including those that have been issued and have not yet been cancelled).

The confirmation of and adjustment to each approved factory storage capacity shall be approved and announced by the Exchange.

The approved factory storage capacity is determined by the Exchange according to the daily production capability, factory storage capacity, the daily delivery amount, the credit of the factory, etc.

Article 52 After the factory submits the performance bonds, the Member, Overseas Special Participant and Overseas Intermediary shall submit the relevant necessary documents and certificates, such as certificates showing payment is settled between the owner and the factory, to the Exchange for verification. After the Exchange verifies and approves such documents and certificates, the Exchange shall notify the factory to issue the factory standard warrant in the standard warrant system.

The factory shall issue the factory standard warrant in the standard warrant system after receiving the Exchange’s approval and instruction to do so.

Article 53 The factory standard warrants issued by the factory taking itself as the owner shall not be collateralized as margin.

Article 54 The holder of the factory standard warrants shall pay the storage fees to the factory during the period holding the standard warrants.

Article 55 The daily delivery amount means the minimum quantities of commodities that the factory shall arrange to deliver within twenty-four (24) hours. The confirmation and adjustment of the daily delivery amount of the factory shall be approved and announced by the Exchange. The factory shall not change the daily delivery amount without approval. The manufacturer shall seek prior approval from the Exchange if it needs to adjust the daily delivery amount due to normal maintenance or other reasons.

Article 56 Defaults during factory delivery of different futures commodities shall be dealt with according to the specific provisions in the section for the corresponding listed requirements provided in these Rules.

Chapter 6 Delivery Default

Article 57 Any of the following conducts constitutes the delivery default:

1. The seller fails to deliver the standard warrants in sufficient amounts within the provided delivery period;

2. The buyer fails to make the payment in sufficient amount within the provided delivery period;

3. Other conducts the Exchange deems as delivery default.

Article 58 In calculating the delivery default quantity of the buyer of a futures contract, a deposit of twenty percent (20%) of the value of the contract shall be reserved for penalties and compensation. The following formulas shall be used to calculate the delivery default quantities of the buyer or the seller:

The delivery default quantities of the buyer (lots) = the standard warrant quantities due (lots) – the standard warrant quantities delivered (lots)

The delivery default quantities of the seller (lots) = (payment due – payment made) ÷ (1-20%) ÷ the final settlement price ÷ contract size

Article 59 Once the delivery default occurs, the Exchange shall notify the defaulting party (the defaulter) and the non-defaulting party (the defaultee) before 16:30 on the day of default.

Article 60 In case only one party defaults, the defaulter shall pay the defaultee a penalty of five percent (5%) of the delivery default quantity multiplied by the final settlement price, and the defaultee may choose either method as follows to terminate the current delivery.

The first method: the Exchange returns the payment for goods or the standard warrants to the defaultee to terminate the current delivery.

The second method: the defaultee opens new position in the same direction as its previous position in the first-nearby or second-nearby contract within two (2) consecutive trading days after the Exchange determines a delivery default has occurred. The defaulter pays the defaultee the compensation for difference, the transaction fees for position opening, the storage fees (if the defaultee is the seller) and other losses. The Exchange returns the payment for goods or the standard warrants to the defaultee to terminate the current delivery.

Within the period from the delivery default to the termination of the current delivery, all the new positions in the first-nearby or the second-nearby contract opened by the defaultee which do not exceed the quantity of contract that is subject to delivery default shall be deemed as the disposal of the delivery default contract. If the defaultee fails to dispose all of the delivery default contracts within two consecutive trading days, the remaining position opening may be postponed to the next trading day upon the approval by the Exchange.

“The compensation for difference” means the cumulative value of positive differences between the final settlement price of the delivery default contract and the long or short position opening price of the first-nearby or second-nearby contract, up to 15% of the value of the contract which is subject to delivery default, calculated by the following formula:

In the event of the seller default, the compensation for difference X = ∑[(the long position opening price of the first-nearby or second-nearby contract – the final settlement price of the default contract) × corresponding volume of the positions opened for the default contract under disposal]

In the event of the buyer default, the compensation for difference X = ∑[(the final settlement price of the default contract – the short position opening price of the first-nearby or second-nearby contract) × corresponding volume of the positions opened for the default contract under disposal]

Article 61 In case both the buyer and seller default, the Exchange shall terminate the delivery and fine the buyer and the seller respectively by charging the compensation at the value of 5% of the contract subject to default.

Article 62 When the delivery is terminated, the Exchange’s obligations to guarantee the delivery shall be dismissed.

Article 63 If the Members commit partial delivery default, the Exchange may use the standard warrants or the payment for goods received by the Members for the resolution of the default.

Article 64 When the Clearing and Delivery Principals fail to perform the physical delivery, and the Members they entrust perform the contract on behalf of them, the Exchange may transfer the corresponding standard warrants into the standard warrant accounts of the Members after it examines and approves the Members’ applications. The Members may legally dispose of the corresponding standard warrants.

Article 65 If the Members, Overseas Special Participants, Overseas Intermediaries or Clients deliberately commit a default on physical delivery, they shall be subject to sanctions provided in the Enforcement Rules of the Shanghai International Energy Exchange.

Article 66 The Members, Overseas Special Participants, Overseas Intermediaries, Clients and the Designated Delivery Warehouses have the obligations to provide the relevant evidence materials regarding the default conducts.

Article 67 Any delivery disputes between the buyer or the seller and the Designated Delivery Warehouses shall be promptly reported to the Exchange by the Designated Delivery Warehouses. Both parties in the dispute may negotiate and settle the dispute between them. If the negotiation fails, either party may apply to the arbitration committee for arbitration according to their arbitration agreement. If no arbitration agreement is agreed or the arbitration agreement is invalid, a legal proceeding may be initiated to the applicable court.

Chapter 7 Management of Designated Delivery Warehouses

Article 68 An applicant applying to be a Designated Delivery Warehouse shall meet the following criteria:

1. Having a corresponding commodity storage business license which satisfies the local laws and regulations. Having the bonded storage business license if applying for the bonded delivery businesses.

2. Having a sound financial condition and comparatively strong risk resistant ability. The registered capital and net asset shall reach the amount prescribed by the Exchange.

3. The warehouse storage capacity or factory production capacity shall meet the requirements prescribed by the Exchange.

4. Having good business reputation. No record of serious non-compliance or disqualification of the Designated Delivery Warehouse within the recent 3 years.

5. Having the developed rules and systems for the production of the relevant commodities, management of load-in or load-out and storage management. The safety and measurement satisfy the relevant laws, regulations and industry requirements.

6. The major managers shall have over 5 years’ production or storage management experience. Having a professional management team.

7. Having good conditions for transportation. Terminal facilities, port conditions and equipment are in good condition and sufficient.

8. Recognizing and undertaking to abide by the Exchange’s trading rules, delivery rules, etc.

9. Other requirements prescribed by the Exchange.

Article 69 An applicant applying for the Designated Delivery Warehouses shall submit the following documents:

1. An application letter with the valid signatures.

2. Certificates proving the establishment of enterprises such as the business license, organization code certificate and tax registration certificate, qualification certificates for commodities storage business and qualification certificates of metrology personnel.

3. The auditing reports issued by the registered accounting firms for the recent two years.

4. The certificates of use of land (or the lease contract of land) and use of terminals (or the lease contract of terminals), and the relevant documents about port conditions and facilities.

5. The letter approving the application for Designated Delivery Warehouse issued by the applicant’s immediate superior authority or the Board of directors.

6. The letter of joint guarantee that satisfies the Exchange’s requirement.

7. The rules, systems and introductions of the commodities load-in, load-out and storage management. The resumes of the main managers and the management team.

8. Other documents required by the Exchange.

Article 70 The approval process for the Designated Delivery Warehouses shall consist of the following procedures:

1. The Exchange conducts a preliminary examination.

2. After the preliminary examination, the Exchange may conduct an on-site investigation and assessment.

3. According to the results of the on-site investigation and assessment and the provisions of the laws and regulations, the Exchange selects the best applicants and signs the agreement of the Designated Delivery Warehouse therewith.

Article 71 After becoming the Designated Delivery Warehouse as approved by the Exchange, the warehouse shall:

1. Pay the risk collateral according to the requirements stipulated in the agreement of the Designated Delivery Warehouse.

2. Appoint one responsible person in charge of the futures delivery business; appoint designated personnel in charge of managing the delivery commodities and conducting the standard warrant businesses. The managers shall be trained by the Exchange for delivery businesses.

3. Make operational instructions according to these Rules. Start the relevant futures delivery businesses only after the Exchange’s examination and approval.

4. Other requirements prescribed by the Exchange.

Article 72 The Exchange may start using the back-up delivery warehouses when it deems necessary. The back-up delivery warehouses as the back-up storage for the Designated Delivery Warehouses, include the back-up warehouses and back-up factories.

The application and approval of the back-up delivery warehouses shall be processed according to the requirements and procedures regarding the Designated Delivery Warehouses prescribed in the Articles 68, 69 and 70 of these Rules. The Exchange shall sign a letter of agreement with the back-up delivery warehouses that pass its verifications, and have the rights to require the warehouses to provide the updated relevant application materials in accordance with the stipulations in the Article 69 depending on the circumstances before the back-up delivery warehouses formally come into use.

After the Exchange officially issues the notice announcing the usage of the back-up delivery warehouses, the back-up delivery warehouses shall become the Designated Delivery Warehouses, and conduct the relevant businesses according to the stipulations in the Article 71 of these Rules.

Article 73 To give up the Designated Delivery Warehouses qualifications, an application letter shall be submitted to and approved by the Exchange.

Article 74 The Designated Delivery Warehouses shall not conduct the following activities:

1. Issuing fake warrants;

2. Violating the business rules of the Exchange by restricting the delivery commodities from load-in and load-out;

3. Disclosing the business secrets regarding futures trading;

4. Violating the relevant State regulations by participating in futures trading;

5. Having not delivered the goods on time or cooperated with the Designated Inspection Agencies on their inspections without justified reasons;

6. Other activities violating the Exchange’s rules.

Article 75 If the Designated Delivery Warehouses do not meet the application conditions or seriously violate the Exchange’s rules and regulations, the Exchange may disqualify those Designated Delivery Warehouses.

Article 76 The Designated Delivery Warehouse shall conduct the following matters if it gives up its qualification or is disqualified:

1. Move out all delivered commodities or convert them into physicals.

2. Settle all credit and debt with the Exchange.

3. Risk collateral be refunded according to the Exchange’s provisions.

Article 77 The approval, give-up or disqualification of the Designated Delivery Warehouses shall be timely announced by the Exchange and reported to the China Securities Regulatory Commission.

Article 78 The Designated Delivery Warehouses are entitled to the following rights:

1. Issue the standard warrants in compliance with the applicable Exchange rules.

2. Charge relevant fees according to the service items, standards and methods approved by the Exchange.

3. Enjoy rights to advise the Exchange on its relevant provisions regarding physical delivery.

4. Enjoy other rights provided in these Rules and the agreement of the Designated Delivery Warehouses.

Article 79 The Designated Delivery Warehouses shall perform the following obligations:

1. Abide by the Exchange’s general exchange rules, delivery rules and other relevant provisions, accept the Exchange’s supervision and administration, and inform the Exchange of relevant situations.

2. Inspect and accept the futures delivery commodities according to the quality standards provided in the futures contract, and cooperate with the Exchange’s Designated Inspection Agencies for the quality and quantity inspections for the delivery commodities.

3. Store and safe-keep the commodities in the Designated Delivery Warehouses according to the relevant provisions to ensure the safety of the commodities and that the quantities and qualities of the commodities meet the relevant requirements.

4. Explicitly specify the locations to store the futures delivery commodities according to the approved storage capacity situations, and ensure that the futures commodities and physical commodities are stored separately. An independent account book shall be kept for the futures delivery commodities.

5. Keep the business secrets regarding the futures trading.

6. Participate in the Exchange’s annual audit.

7. Fully pay the risk collateral.

8. Promptly report to the Exchange with regard to any changes to its legal representatives, registered capital, shareholders or equity structure, storage venues, designated business personnel, terminal facilities, port conditions, charging items, etc.

9. Abide by all the applicable laws and regulations (including the laws and regulations regarding the environmental protection) and fulfilling other obligations provided in these Rules and the agreement of the Designated Delivery Warehouses.

Article 80 The Designated Delivery Warehouses shall cooperate with the owners to coordinate the relevant agencies including the terminals, ports, pipeline companies, customs and commodity inspection agencies, etc. and ensure the prioritized load-in and load-out of the futures delivery commodities.

Article 81 When the owners conduct the load-in of the commodities, the Designated Delivery Warehouses shall perform the following obligations:

1. Assist the owners to timely and correctly load in commodities, and ensure the formalities and responsibilities are clear.

2. According to the Exchange’s provisions, examine and verify the relevant certificates and documents for the commodities and cooperate with the Designated Inspection Agencies to inspect the quality and quantity of the commodities.

3. After the commodities pass the inspection, confirm information on quantity, quality, storage site of the commodities, etc. when issuing the standard warrants. Issue the standard warrants after receiving the Exchange’s approval and instructions to do so.

Article 82 After the commodities pass the inspection and have been loaded in, the Designated Delivery Warehouses shall store and keep the commodities according to the relevant rules of the State and the Exchange.

Article 83 When the owners require commodities load-out, the Designated Delivery Warehouses shall verify the load-out certificates and conduct the load-out after making sure that there are no errors.

Article 84 The Designated Delivery Warehouses shall be responsible for recording and writing-off records of the commodities ownership transfer and recording such information in the documents and account books.

Article 85 When conducting the formalities for the goods load-in and load-out, the Designated Delivery Warehouses shall enter the corresponding data into the standard warrants system within twenty four (24) hours after the Designated Inspection Agencies issue the inspection reports.

Article 86 The measurement of the Designated Delivery Warehouses shall abide by the Metrology Law of the People's Republic of China, the Implementing Rules for the Metrology Law of the People's Republic of China, and the Administrative Measures on Verification of Measuring Instruments for Compulsory Verification of the People’s Republic of China and other rules and regulations for metrology.

Article 87 All the measuring instruments for compulsory verification used for the futures delivery such as the flow meter, thermometer, density meter, oil (water) dip ruler, oil storage tanks, and measuring instruments and meters for ensuring safety, shall have valid and qualified certificates of verification. The metrology personnel of the Designated Delivery Warehouses shall legally hold a qualification issued by the local metrology authorities and abide by the metrology regulations.

Article 88 The Designated Inspection Agencies shall formulate the implementing rules for commodity futures inspections according to the features of different futures commodities. These rules shall be announced by the Designated Inspection Agencies separately.

Article 89 The staff of the Designated Delivery Warehouses, together with the Designated Inspection Agencies, the owners and transportation representatives, shall examine the quantity, quality and speed of receiving and delivering the commodities, at the time of the operations, and take and seal the samples according to the provisions, and properly conduct handover and measurement.

Article 90 The Designated Delivery Warehouses shall bear the responsibilities for the disqualification caused by mixing different batches of qualified futures commodities.

Article 91 The Designated Delivery Warehouses shall bear the losses caused by the pipeline companies, pump losses and volatilization during the load-in, load-out and storage. The owners shall compensate the Designated Delivery Warehouses according to the loss compensation standards prescribed in the provisions for the corresponding listed futures contract in these Rules.

Article 92 The service items and standards for the fees that occur during the load-in, load-out and storage of the futures commodities shall be verified, approved and announced by the Exchange. The owners shall pay the corresponding storage fees to the Designated Delivery Warehouses before the 25th (or the previous working day if the 25th is a national holiday) of each month.

Article 93 The owners shall pay the adjustment for load-in deposit to the Designated Delivery Warehouses according to the difference between the applied load-in quantity and the actual load-in quantity, unless otherwise stipulated.

Article 94 The Designated Delivery Warehouses shall purchase the relevant commercial insurance for the futures commodities in the approved storage.

Article 95 The Designated Delivery Warehouses shall make contingency plans. When accidents happen at the Designated Delivery Warehouses that may affect the safety of the futures commodities and the load-in and load-out operations, and have an adverse impact on the community, they shall immediately notify the Exchange.

If the commodities overflowed, leaked, were discharged or caused any other environmental pollution during the period when the load-in and load-out operations are conducted or the futures commodities are stored, the Designated Delivery Warehouses shall perform the necessary control and cleaning work according to the laws, regulations, and the requirements of government departments, and inform the relevant environmental departments and the Exchange of the status of the above-mentioned overflow, leak, discharge and control and cleaning work. Any judgment, claim, or cost caused by the environmental pollution shall be assumed by the Designated Delivery Warehouses.

Article 96 The Exchange implements the random check and annual examination system. The contents of the examination include the storage facilities, storage capacity, storage appearance, operational capacity, business performance, account management, the owners’ satisfaction levels and other contents the Exchange deem necessary.

1. The Exchange may carry out random checks at any time on one or more items of the work of the Designated Delivery Warehouses and make detailed records, in order to check the implementation of the provisions of the Exchange in the daily work of the Designated Delivery Warehouses.

2. The Exchange implements an annual examination on the work of the Designated Delivery Warehouses each year, conducts assessment and evaluation, and comes up with the requirements for the next year. For the Designated Delivery Warehouses that do not meet the requirements, the Exchange may reduce the approved storage capacity, suspend the delivery business or even remove the qualifications of the Designated Delivery Warehouses.

Article 97 The Designated Delivery Warehouses shall conduct the monthly self-examinations and keep the records thereof according to these Rules and the actual situations of the Designated Delivery Warehouses.

Article 98 The specific amount and payment method of the risk collateral shall be written in the agreement of the Designated Delivery Warehouses. If no default or no economic compensation liabilities due to other reasons occurred to the Designated Delivery Warehouses, the Exchange shall return the interests of the risk collateral to the Designated Delivery Warehouses before each year end (The interests are calculated at the bank’s current deposit interest rate over the same period announced by the People’s Bank of China). If the Designated Delivery Warehouses is required to pay economic compensation and has not paid in full, the Exchange shall pay the compensation with the paid risk collateral, and if such collateral is not sufficient for the compensation, the Exchange has rights to recover the compensation from the Designated Delivery Warehouses.

Article 99 If the holders of the standard warrants cannot exercise or fully exercise their rights of the standard warrants because of the faults of the Designated Delivery Warehouses, the Designated Delivery Warehouses shall bear the compensation liabilities.

If the Designated Delivery Warehouses are not the legitimate holders of the standard warrants, they shall not claim ownership of the futures commodities, and are forbidden from creating any mortgage or other security interests on the futures commodities. If the Designated Delivery Warehouses encounter bankruptcy, such futures commodities shall not be classified as the bankruptcy property.

Chapter 8 Management of Standard Warrant

Article 100 The Exchange shall establish, maintain and manage the standard warrants system, and manage the standard warrant related businesses provided in these Rules.

The standard warrant business participants such as the Exchange, Members, Overseas Special Participants, Overseas Intermediaries, Clients and Designated Delivery Warehouses shall use the Exchange’s standard warrants system for all matters related to the standard warrants.

Article 101 The Members, Overseas Special Participants and Overseas Intermediaries shall arrange the designated personnel to use the standard warrants system to conduct the delivery, settlement and other standard warrant businesses.

Article 102 The standard warrant business participants shall submit the application materials in the standard warrants system and open a standard warrant account before they can hold the standard warrants and participate in the standard warrant operations. The materials for account opening shall be true, complete and valid.

The standard warrant account follows the trading code system; i.e. each standard warrant business participant can only have one standard warrant account.

The Members, Overseas Special Brokerage Participants and Overseas Intermediaries shall assist their Clients in opening the standard warrant accounts and shall be responsible for the verification of the authenticity, completeness and validity of the provided materials.

       The rules of account opening procedures of a standard warrant account and the detailed instructions on using and operating the standard warrants system will be prescribed by the Exchange separately in accordance with these Rules.

      Article 103 Once the standard warrants are created in the standard warrants system, they shall exist in the electronic forms and include the following items:

      1. The (full) names of owners;

      2. The product name, quantity and quality of the commodities;

      3. The storage venues;

      4. The storage fees;

      5. The insured amount, period and the name of the insurer, if the stored goods are insured;

      6. The issuer of the warrant and the date of issuance;

      7. Other information the standard warrants shall record.

      Article 104 the standard warrants can be used for making delivery, serving as margin collateral, being pledged, transferred and taking delivery of goods. They can also be used for other purposes provided by the Exchange.

      Article 105 The procedures of creating a warehouse standard warrants include steps such as the load-in application, approval of the load-in application, commodity load-in, inspection and acceptance, approval of warrant issuance application, warrant issuance by the warehouses and final confirmation; the procedures of creating a factory standard warrants include steps such as the submission of the issuance application, verification by the Exchange, issuance by the factories and final confirmation.

     The steps regarding warehouse standard warrants such as the load-in application, approval of load-in application, commodity load-in, inspection and acceptance, approval of the warrant issuance application, warrant issuance by the warehouses, etc. shall abide by the provisions of the Chapter 4 of these Rules. The steps regarding factory standard warrants such as the submission of the issuance application, verification by the Exchange, issuance by the factories, etc. shall abide by the provisions of the Chapter 5 of these Rules.

     Article 106 The owners shall conduct final confirmation of the standard warrants created by the Designated Delivery Warehouses. If the owners have not made the confirmation of inspection and acceptance for the standard warrants within 3 days after receiving the notice of inspection and acceptance for the standard warrants, it is deemed that the final confirmation has been made and the standard warrants enter into force automatically.

    Article 107 The valid periods for the standard warrants are provided by the Exchange according to different features of the futures commodities. The standard warrants exceeding the valid periods shall not be used for futures delivery. The valid periods for the standard warrants shall abide by the specific provisions in the section for the corresponding listed futures contract in these Rules.

    Article 108 Members shall directly apply to the Exchange for using standard warrants as margin collateral.

    The business operations for the Clearing and Delivery Principals to authorize the Members to use the standard warrant as margin collateral are as follows:

    1. The Clearing and Delivery Principals shall first authorize the Members to use the designated standard warrant as margin collateral of the Members.

    2. The Members shall select and submit the standard warrants designated by the Clearing and Delivery Principals to the Exchange. When the Members submit the standard warrants, they shall mark whether the standard warrants shall be used as margin collateral, or as the performance bonds for the positions of the futures contract of the same product and quantity as indicated by the warrant.

    3. Only after the Exchange’s verification and approval can the standard warrants be used as margin collateral.

    If the Clients of Overseas Special Brokerage Participants or Overseas Intermediaries deposit the standard warrants to the Exchange to serve as margin collateral, they shall authorize the Overseas Special Brokerage Participants and Overseas Intermediaries to conduct the relevant formalities for them.

    Article 109 After the Clearing and Delivery Principals authorize the Members to use the standard warrants as margin collateral, the Members may apply to the Exchange for conducting the formalities to redeem the standard warrants after such margin collateral is paid up.

    If the disputes regarding redeeming the standard warrants arise between the Members, Overseas Special Brokerage Participants, Overseas Intermediaries and their Clients, the Exchange may reassign the corresponding standard warrants to the standard warrant accounts as provided in the agreement entered into by the Members, Overseas Special Brokerage Participants, Overseas Intermediaries and their Clients, or resort to the measures as prescribed by other legal documents that have entered into force.

    Article 110 Members shall directly apply to the Exchange to redeem the standard warrants which are served as margin collateral.

    The process of the Clearing and Delivery Principals’ redemption of the standard warrants which are served as margin collateral is as follows:

    1. The Clearing and Delivery Principals shall apply to the Members to redeem the standard warrant.

    2. After the Members receive the application, they shall promptly submit the application to the Exchange to redeem the standard warrants.

    3. The Exchange shall verify the application. After the Exchange approves the application, it shall return the corresponding standard warrants to the Members.

    4. The Members shall promptly return the corresponding standard warrants to the Clearing and Delivery Principals, and shall report and explain to the Exchange if they fail to do so.

    When the Clients of Overseas Special Brokerage Participants or Overseas Intermediaries redeem the standard warrants which are served as margin collateral, they shall authorize the Overseas Special Brokerage Participants or Overseas Intermediaries to conduct the relevant formalities for them.

    Article 111 Other matters for the standard warrants collateralized as margin shall abide by the relevant provisions of the Clearing Rules of the Shanghai International Energy Exchange.

    Article 112 The use of a standard warrant as pledge allows the pledger (the debtor or the third person) to place the standard warrant in the possession of the pledgee (the creditor) to guarantee the performance of its obligation. In the event the pledger fails to perform its obligations or the stipulated circumstances for the enforcement of the right of the pledge occurs, the pledgee shall be paid in priority out of the proceeds of the discounted redemption, auction or sale of the standard warrant.

    Article 113 The pledgor shall list the information of the standard warrants to be used as pledge in the pledge agreement that it enters into with the pledgee and present a duplicate copy of the pledge agreement to the Designated Delivery Warehouse for record.

    Article 114 The pledge registration process of the standard warrants in the standard warrants system is as follows:

    1.If the pledgor uses the standard warrants for pledge, it shall submit a pledge registration application to the Designated Delivery Warehouses via the standard warrants system.

    2.The Designated Delivery Warehouses examine and approve the pledge registration application according to the duplicate copy of the pledge agreement.

    3. The pledgee confirms the validity of the standard warrants submitted for the pledge registration via the standard warrants system.

    4. The Designated Delivery Warehouses shall register and keep secure of the pledged standard warrants and shall not perform physical delivery, transfer, withdrawal, or other similar transactions therefor.

    If the bonded standard warrant is used for pledge, the filing procedure shall be conducted with the competent customs authority in advance.

    Article 115 The Designated Delivery Warehouses shall register and keep secure of the standard warrants when it is in use as pledge, and preserve the warranted goods in good condition.

    Article 116 The procedure of discharging a standard warrant as pledge consists of the following:

    1. If the pledgee chooses to discharge a standard warrant, it shall submit a discharge application to the Designated Delivery Warehouse via the standard warrants system.

    2. The Designated Delivery Warehouse shall examine and verify the discharge application;

    3. The pledgor shall confirm the validity of the standard warrant submitted for discharge application of the pledge via the standard warrants system.

    If the bonded standard warrant is to be discharged, the filing procedure shall be conducted with the competent customs authority in advance.

    Article 117 The Designated Delivery Warehouses shall return the standard warrant pledge checklist and the standard warrant discharge-off-pledge checklist, both of which bear the signature and corporate seal of the Designated Delivery Warehouses, to the pledgor and the pledgee.

    Article 118 The standard warrants may be transferred off the Exchange and settled either in a bilateral manner between the transferor and transferee, or via the Exchange. The Exchange charges the handling fee for the delivery according to the standards if the settlement occurs via the Exchange.

    Article 119 The process of transferring standard warrants in a bilateral settlement manner between the buyers and sellers is as follows:

    1. The sellers shall submit the application for transfer after inputting the name of the products, name of the Designated Delivery Warehouses, trading codes of the buyers and names of the buyers, the details of the corresponding standard warrants and other relevant information into the standard warrants system.

    2. The buyers confirm the application for transfer via the standard warrants system.

    3. The Designated Delivery Warehouses examine and verify the application for transfer.

    4. The buyers make the payment as bilaterally agreed.

    5. Upon receiving the payment, the sellers shall release the standard warrants to the buyers’ standard warrant accounts.

    Article 120 The transfer of standard warrants settled by the Members via the Exchange shall be conducted as follows:

    1. The seller shall submit the application for transfer after inputting the name of products, name of the Designated Delivery Warehouses, trading codes and names of the buyers, transfer price, the details of the corresponding standard warrants and other relevant information into the standard warrants system.

    2. The buyers confirm the application for transfer via the standard warrants system, and deposit the payment into the Member’s dedicated margin account.

    3. The Designated Delivery Warehouses verify and approve the application of transfer and notify the buyers, sellers and the Exchange thereof.

    4. The Exchange prints the settlement statements for transferring the standard warrants and collects and remits the payment.

    5. The Exchange releases the standard warrants, and the corresponding standard warrants are transferred to the buyers’ standard warrant accounts.

    The Clearing and Delivery Principals shall conduct the transfer of the standard warrants settled by the Exchange through the Members according to the preceding clause.

    When the Clients of Overseas Special Brokerage Participants or Overseas Intermediaries transfer the standard warrants settled via the Exchange, they shall authorize the Overseas Special Brokerage Participants or Overseas Intermediaries to conduct the formalities.

    The Exchange shall complete the transfer procedures within the current day if the application for transferring the standard warrants is submitted before 14:00. The Exchange shall complete the transfer procedures on the next trading day if the application for transferring the standard warrants is submitted after 14:00.

    Article 121 If the owners of goods need to modify any data pertaining to the standard warrant such as the storage places, they shall submit the application for modifying the standard warrants via the standard warrants system. Data modification shall be completed upon the examination and verification by the Designated Delivery Warehouses and the Exchange.

    Article 122 If the Designated Delivery Warehouses need to change the storage venue for the commodities of the standard warrants, they shall apply to the Exchange in advance. The Exchange shall respond to the application within ten (10) trading days. The Designated Delivery Warehouses shall notify the owners of the change of the storage venue after the change is completed and timely modify the corresponding data of venue for the standard warrants in the standard warrants system.

    Article 123 For the futures commodities subject to quality inspection validity period, when the quality inspection report for the corresponding commodities of standard warrants expires, the owners shall have the commodities re-inspected, and apply to the Exchange for changing the quality inspection report. After the Exchange examines and verifies the validity of the revised quality inspection report, the Designated Delivery Warehouses shall change the corresponding quality inspection report and the quality inspection expiry date as shown in the standard warrants system.

    Article 124 In the event that a dispute arise between the standard warrant business participants regarding the standard warrants, or the ownership of the standard warrants, the Exchange may either at the request of the interested parties or at its sole discretion freeze the corresponding standard warrants until the dispute is resolved.

    Article 125 The applicants for freezing or unfreezing the standard warrants shall hold the valid legal documents and other applicable documents of proof to the Designated Delivery Warehouse, and once verified by the warehouse, exercise the right to freeze or unfreeze the standard warrant through the standard warrant system.

    The Designated Delivery Warehouses shall notify and report to the Exchange for filing on the freezing and unfreezing of a standard warrant.

     During the freezing period of the standard warrant, the Designated Delivery Warehouses shall take good care of the relevant commodities. After the standard warrant is unfrozen, the Designated Delivery Warehouses shall dispose of the relevant commodities pursuant to what the valid legal documents enforce.

     Article 126 The revocation of standard warrants refers to the process where the owners have objections against the data of the standard warrants issued by the Designated Delivery Warehouses that have entered into force, except for the data which the Exchange allows to be adjusted, such as the storage venue, the dates for quality inspection, etc., and the owners submit the application for revoking the standard warrants, and the standard warrant is cancelled after being examined and approved by the Designated Delivery Warehouses and the Exchange.

     If the revoked standard warrant needs to be renewed as a corresponding new standard warrant, the new load-in application formalities shall be conducted with the Exchange.

     Article 127 The load-out of the standard warrants refers to the process where the legal holders of the standard warrants apply via the standard warrants system to the Designated Delivery Warehouses for taking delivery of goods, or for converting the standard warrants into physical document of title, and the Designated Delivery Warehouses conduct the formalities. The standard warrants shall be cancelled upon the completion of load-out.

     Article 128 When the legal holders of the standard warrants take delivery of goods, they shall submit the load-out application of standard warrants to the Designated Delivery Warehouses. The handling staff of Designated Delivery Warehouses shall deliver the goods according to the load-out checklist and the relevant documents and certificates of standard warrants after the examination and approval of the Designated Delivery Warehouses. 

    Article 129 The legal holders of standard warrants shall indicate the approaches of taking delivery in the load-out application.

    1. If the owners take delivery of goods at warehouses by themselves, the Designated Delivery Warehouses shall examine the standard warrants and release the goods if there are no errors. The owners shall oversee the delivery at the warehouses. Otherwise, the owners shall be deemed to have agreed with the validity of that delivery by the Designated Delivery Warehouses.

    2. If another party is entrusted to take delivery of goods, the owners shall submit the power of attorney, and indicate in the load-out application regarding the entrusted delivery persons, password for taking the delivery, the contact persons and contact telephone numbers. The Designated Delivery Warehouses shall examine the standard warrants and release the goods if there are no errors. The entrustee shall oversee the delivery at the warehouses; otherwise, the owner shall be deemed to have agreed with the validity of the delivery by the Designated Delivery Warehouses.

    3. If the owners entrust the Designated Delivery Warehouses to take delivery and dispatch goods, the owners shall provide the power of attorney, and indicate in the load-out application the destination address for the goods, the contact persons and contact telephone numbers. The Designated Delivery Warehouses shall examine the standard warrants and send the goods if there are no errors. The owners shall be deemed to have agreed with the validity of the delivery by the Designated Delivery Warehouses.

    Article 130 At the time of commodity load-out, the Designated Delivery Warehouses shall timely fill in the Load-out Confirmation Form for Standard Warrant, which shall be signed and confirmed by the taker of the delivery, and well-kept for future examinations.

    Chapter 9 Management of Commodity Registration

    Article 131 The Exchange may implement the commodity registration management on the delivery commodities. If a futures contract of the listed products is subject to commodity registration management, the commodities used for the physical delivery must be the commodities approved for registration by the Exchange. The registered commodities approved by the Exchange for exemption from inspection may be exempted from inspection in the delivery.

    Article 132 The delivery commodities for the commodity registration application shall meet the following basic conditions. The specific conditions shall be further prescribed in the section for the corresponding listed futures contract in these Rules.

    1. The enterprises that apply for the commodity registration shall be the domestic or foreign manufacturers of the relevant commodities and comply with the following requirements:

    (1) The enterprises shall meet the Exchange’s requirements for the production capacity and outputs, and have been providing continuous stable production for at least two (2) years;

    (2) The enterprises have considerable popularity and reputation and hold the relevant certificates for quality, environmental management, safety, etc.

    (3) The production process is in line with the relevant domestic and foreign industry standards.

    2. The commodities applying for registration shall meet the following requirements:

    (1) The quality standard shall meet the national standard and the Exchange’s technical requirements;

    (2) The commodities are widely used for the last three (3) years in the relevant field;

    (3) The commodities the enterprises apply for registration shall account for a considerable share in the physicals market, and have a considerable popularity in the industry.

    3. The commodities are recommended by more than one Members or Overseas Special Participants of the Exchange. 

    4. Other requirements prescribed by the Exchange.

    Article 133 The following materials shall be provided for the commodity registration:

    1. An application letter for registration and an undertaking letter that have been legally signed;

    2.The documents proving the establishment of the company, including the business license, organization code certificate, tax registration certificate and certificate of incorporation, etc.;

    3. The situations of the corporate shareholders and ownership structure, the organizational structure and the branches;

    4. The commodity registration forms;

    5. The documentary proof that evidence the quality of the commodities;

    6. The documents that evidence the certificates of quality, environment, safety and other systems;

    7. The documents that evidence that the major production equipment and facilities of the enterprises meet the requirements;

    8. The latest audited annual financial statement;

    9. The recommendation letters for the commodity registration from more than one Members or Overseas Special Participants of the Exchange. The recommender shall be responsible for the accuracy and completeness of the application materials, as well as the qualification, credit, production capacity, etc. of the applicant;

    10. Other documents required by the Exchange.

    If the commodities for registration have registered trademarks, the certificate of trademark registration shall also be provided.

    Article 134 The process of registration is as follows:

    1. Prequalification

    The Exchange prequalifies the written materials provided by the enterprises applying for the registration of commodities. The applicants shall pass the prequalification in order to enter into the next stage of registration.

    2. Quality supervision and inspection

    The Exchange’s Designated Inspection Agencies and the relevant personnel shall conduct the quality supervision and inspection on the domestic and foreign commodities according to the relevant provisions of the State or the Exchange.

    3. Approval of registration

    The Exchange shall determine whether to approve the registration of the commodities according to the application materials, the quality supervision and inspection of the commodities and other conditions. If the registration is approved, the Exchange shall announce the registration.

    Article 135 The applicants for the commodity registration shall bear the following fees:

    1. The registration fee is RMB one hundred thousand (¥100,000) for a single brand of commodity;

    2. The inspection fee is RMB fifty thousand (¥50,000) for a single manufacturer.

    The Exchange may adjust the relevant fee standards according to the actual situations. The registration fee shall be prepaid before the approval of the registration.

    Article 136 The Exchange performs random checks and annual inspections over the registered commodities to ensure the quality of the delivery commodities.

    1. The Exchange conducts the random quality checks at any time over the delivery commodities stored in each Designated Delivery Warehouse.

    2. The Exchange entrusts the Designated Inspection Agencies to conduct an annual inspection over the registered goods. The manufacturers of the registered commodities shall provide the enterprises’ annual inspection reports to the Exchange before each year end, including the continuous operations of the enterprises, the major changes in production and operations, and other information.

    The fees for the random checks and annual inspections shall be borne by the manufacturers of the registered commodities. The Exchange may issue the notice for rectification to the manufacturers of the registered commodities according to the results of the random checks and annual inspections.

    Article 137 Upon the occurrence of the following circumstances to the registered commodities, the Exchange may suspend or revoke the qualification of registration:

    1. The division, merger, change of name or change of organizational form of the manufacturers of the registered commodities;

    2. The transfer of the registered trademark of the commodity;

    3. The dissolution and bankruptcy of the manufacturers of the registered goods;

    4. The disqualification in the random checks or annual inspections of the registered commodities; and the quality of the registered commodities fails to reach the standard after the rectification;

    5. More than two cases of complaints in the recent year on failing to pass inspection which are verified to be true by the Exchange;

    6. Abnormal production operation, or the annual outputs do not meet the requirements prescribed by these Rules and no explanation has been made to the Exchange;

    7. The manufacturers of the registered commodities have not reported to the Exchange the major changes in the productions or operations according to the relevant provisions;

    8. Other situations identified by the Exchange.

    When the above-mentioned first or second circumstance occurs, the registration process shall be re-conducted.

    Article 138 If any disputes arise out of the quality of the delivery commodities during the delivery, the manufacturers of the registered commodities shall cooperate with the Exchange to properly resolve the disputes. If the quality problems of the delivery commodities are caused by the manufacturers of the registered commodities, the manufacturers shall bear the compensation obligations.

    Chapter 10 Delivery of Crude Oil Futures Contract

    Article 139 The crude oil futures contract implements physical delivery. Physical delivery shall be made for the expired crude oil futures contracts according to the standard delivery procedures. The EFP delivery procedures may be conducted for the unexpired crude oil futures contracts.

    Article 140 The delivery of the crude oil futures contract implements the bonded delivery which means the delivery of crude oil for the futures contract shall be in bonded status in bonded oil tanks at the Designated Delivery Warehouses.

    Article 141 The delivery of the crude oil futures contract implements warehouse delivery. The specific process shall abide by the provisions in the Chapter 4 of these Rules.

    Article 142 After the market closes on the eighth trading day prior to the last trading day of a crude oil futures contract, the positions in such futures contract held by a natural person as a Client that may not deliver or receive the invoices required by the Exchange shall be 0 lot. From the seventh trading day prior to the last trading day onwards, the positions held by such Client in the delivery month shall be directly liquidated by the Exchange.

    Article 143 The delivery unit of a crude oil futures contract is a hundred (100) barrels. The actual delivery amount is the integral multiple(s) of the delivery unit.

    Article 144 See the Standard Crude Oil Futures Contract of the Shanghai International Energy Exchange for the delivery grades. The crude oil contract does not implement commodity registration management.

    Article 145 The minimum amount of the crude oil loaded into warehouses is 200,000 tanks. The minimum amount of the crude oil loaded out of warehouses is 200,000 tanks. However, if the load-out amount is less than 200,000 tanks, it can be supplemented to 200,000 by the physicals and then the load-out operations can be performed, unless otherwise agreed between the owners and the Designated Delivery Warehouses.

    Article 146 A deposit for load-in of RMB1.5 yuan /tank shall be posted before the crude oil load-in.

    Article 147 The owners shall properly coordinate with the relevant agencies such as terminals, ports, pipeline companies, customs, commodity inspection agencies, etc. regarding load-in matters before the load-in application, and file the load-in application with the Exchange at least thirty (30) days prior to the proposed loading date when the crude oil will be loaded into the Designated Delivery Warehouses. The valid period for crude oil load-in is from five (5) days before to five (5) days after the proposed loading date for the crude oil load-in.

    Article 148 The crude oil being loaded-in shall be the crude oil that is shipped from the port of loading in the country of origin or stored in the bonded oil tanks in the Designated Delivery Warehouses recognized by the Exchange, and shall not be mixed with other oil during loading and storage. The same bonded oil tank in the Designated Delivery Warehouses shall not contain a mixture of crude oil of different deliverable types.

    Article 149 When the bonded standard warrants are created at the time of crude oil load-in, the inspection reports issued by the Designated Inspection Agencies, bill of lading, certificate of origin, approval of load-in by the customs and other relevant documents shall be provided to the Exchange for its verification and confirmation.

    The bonded standard warrants for crude oil are not subject to the valid period requirement.

    Article 150 The load-in and load-out operations of the Designated Delivery Warehouses cannot affect the quality and quantity of the loaded crude oil. Before and after the crude oil load-in operations, the Designated Delivery Warehouses shall ensure that the oil pipelines is either full or emptied, the oil quality in the pipelines does not affect the quality of loaded oil, and the oil in the pipelines is sufficiently liquid.

     Article 151 The crude oil net barrel quantity is subject to the report issued by the Designated Inspection Agencies which is measured based on the shore tanks of the Designated Delivery Warehouses.

    The formula for the crude oil net-volume barrel quantity:

    Crude Oil Net Barrel Quantity = Crude Oil Gross Barrel Quantity × (1 – the Percentage of Water Impurities)

    Crude Oil Gross Barrel Quantity = Crude Oil Total Measured Volume – Water Content Volume

    Article 152 The loss compensation of load-in and load-out of crude oil is made by the owners of the loaded commodities to the Designated Delivery Warehouses according to the following formula and shall be settled between the owners and the Designated Delivery Warehouses within 3 working days after the inspection reports are issued by the Designated Inspection Agencies:

    The load-in loss compensation = quantities of crude oil bonded standard warrant issued × 0.6‰ × (settlement price of the previous trading day prior to the load-in completion day of the first-nearby crude oil futures contract + premiums or discounts of the delivery)

    The load-out loss compensation = quantities of crude oil bonded standard warrant cancelled × 0.6‰ × (settlement price of the previous trading day prior to the load-out completion day of the first-nearby crude oil futures contract + premiums or discounts of the delivery)

    Article 153 The “overfill and underfill” during load-in is the difference between crude oil load-in quantity in the Designated Inspection Agencies’ quantity certificates and the quantities of the bonded standard warrants issued. The crude oil “overfill and underfill” quantities shall not be over ±2% of applied quantities during load-in. Within the allowed tolerance, bonded standard warrants are created with quantity rounded into hundred barrels. After the inspection reports are issued by the Designated Inspection Agencies, the owners shall directly settle with the Designated Delivery Warehouses according to the following formula:

    The payment for overfill and underfill during load-in = crude oil “overfill and underfill” quantities within tolerance × (settlement price of the previous trading day prior to load-in completion day of the first-nearby crude oil futures contract + premiums or discounts of the delivery)

    The “overfill and underfill” during load-out is the difference between crude oil load-out quantity in the Designated Inspection Agencies’ quantity certificates and the quantities of the bonded standard warrants cancelled. The crude oil “overfill and underfill” quantities shall not be over ±2% of applied quantities for load-out. Within the allowed tolerance, bonded standard warrants are created with quantity rounded into hundred barrels. After the inspection reports are issued by the Designated Inspection Agencies, the owner shall directly settle with the Designated Delivery Warehouses directly according to the following formula:

    The payment for overfill and underfill during load-out= crude oil “overfill and underfill” quantities within tolerance × (settlement price of the previous trading day prior to load-out completion day of the first-nearby crude oil futures contract + premiums or discounts of the delivery)

    Article 154 The final settlement price of the crude oil futures is the benchmark price for the delivery settlement of crude oil futures, and is calculated as the arithmetic mean value of the settlement prices of that contract during the last five (5) trading days on which deals are made for the futures contract. At the delivery settlement, the buyers and the sellers settle base on the final settlement price of the crude oil futures contract and then add premiums or discounts of the delivery.

    1. The calculation and assessment basis of the duty-paid price after customs declaration by the holders of crude oil bonded standard warrant is the bonded final settlement price. The formula for the bonded final settlement price of the mature contract is:

    Bonded Final Settlement Price = Final Settlement Price

    2. When the bonded standard warrant is used for EFPs, the formula for the EFP bonded final settlement price is:

    EFPs Bonded Final Settlement Price = Settlement price of the delivery month contract of the trading day immediately before the EFPs application day

    3. When non-standard warrants are used in the EFPs, the final settlement price shall be agreed by both parties.

    Article 155 The formula of payment for the delivered crude oil bonded standard warrant is: 

    Delivery Payment for Expired Contract = (Bonded Final Settlement Price + Delivery Premiums and Discounts) × Delivery Quantity   

    EFPs Delivery Payment = (EFPs Bonded Final Settlement Price + Delivery Premiums and Discounts) × Delivery Quantity

    The requirements and management of the invoice for crude oil futures contract shall be announced by the Exchange respectively. One shall refer to the Chapter 2 in these Rules for the circulation process of the invoice.

    Article 156 The buyers and sellers of the physical delivery shall pay a delivery fee of RMB 0.05yuan/barrel to the Exchange respectively.

    Article 157 The delivery venues are the Designated Delivery Warehouses announced separately by the Exchange.

    The charging items and standards of the Designated Delivery Warehouses shall be announced by the Exchange separately.

    Article 158 The Designated Inspection Agencies shall be announced by the Exchange separately.

    Article 159 Definitions in the crude oil futures delivery:

    1. The “crude oil” in these Rules refers to the liquid hydrocarbons exploited directly from underground natural reservoir, or a mixture of its natural form. The influence of volatilization of light hydrocarbons, hydrogen sulfide, mercaptan, etc., during the crude oil loading and unloading on atmospheric environment shall conform to the local regulatory requirements of the loading and unloading.

    2. The “Water content” means the free water, which is the water whose layer separates from the oil layer and mainly exits below the oil layer.

    3. The “Water impurities” means the suspended substances, sediments, dissolved water and suspended water in the oil sample. The water and sediments shall be identified respectively according to ASTM D4006 and ASTM D473. The sum of the two comprises the amount of water impurities and shall be shown in percentage.

    Chapter 11 Supplementary Provisions

    Article 160 The buyers and sellers in these Rules include the Members, Overseas Special Participants, Overseas Intermediaries or Clients. The owners in these Rules mean the persons who have the legal ownership on the commodities.

    Article 161 The written materials submitted to the Exchange by the relevant subjects prescribed by these Rules shall have the Chinese versions and Chinese versions shall prevail, unless otherwise recognized by the Exchange.

    Article 162 Any matters not provided in these Rules shall be governed by the Articles of Association, the trading rules and other detailed implementing rules of the Shanghai International Energy Exchange.

    Article 163 The Exchange reserves the right of interpretation to these Rules.

Article 164 These Rules are implemented as of [ ].



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