The Phaserl


SGE Trading Volumes Surged by 43% in 2016 Led by OTC and Deferred Trading

by Ronan Manly, BullionStar:

The growing influence of the Shanghai Gold Exchange (SGE), the world’s largest physical gold exchange, is a topic familiar to many. So it is not surprising that trading volumes at the SGE continued their dramatic rise in 2016, with a record 24,338 tonnes of gold traded across physical delivery and deferred settlement contracts.

Volumes in 2016 were a staggering 43% higher vis-a-vis the 17,033 tonnes traded on the SGE during 2015, which itself was a strong year, since 2015 volumes were 84% higher than the 9,243 tonnes of gold traded at the Exchange in 2014. See “SGE Gold Trading Volume 2015 Up 84 % Y/Y Due To International Board” for more information about the 2015 volumes.

Therefore, in the space of three calendar years, the SGE has seen total trading volumes nearly triple, which is quite an achievement by any standard.

Shanghai Gold Exchange: The world’s largest physical gold trading venue

SGE Contracts: Physical Delivery and Deferred

Overall, there are 17 contracts listed on the SGE which can contribute to the trading volumes reported by the Exchange. On top of this, the trading volume generated by the SGE’s daily Shanghai Gold Benchmark Price auction (which was launched in April 2016) is also factored into the SGE’s overall trading volume.

The 17 contracts offered by the SGE cover trading in both physical products and deferred products. Five physical products trade on the Main Board of the Exchange (domestic) and a further 3 physical products trade on the Exchange’s International Board. These 8 products are as follows:

Au50g (50 gram gold bar, 9999 fine)
Au100g (100 gram gold bar, 9999 fine)
Au99.99 (1 kg gold ingot, 9999 fine)
Au99.95 (3 kg gold ingot, 9995 fine)
Au99.5 (12.5 kg gold ingot, 995 fine)
iAu100g (100 gram gold bar, 9999 fine)
iAu99.99 (1 kg gold ingot, 9999 fine)
iAu99.5 (12.5 kg gold ingot, 995 fine)

There are also 4 deferred settlement products offered by the SGE. These 4 products only trade on the Main Board. Deferred settlement contracts trade on margin, and as the name suggests, the contracts can be settled on trading day or at a later date. Two of the four are T + D contracts, the other two are T + N contracts:

T + D contract: Non-Fixed Maturity Dates

Au(T+D) (1 kg per lot, delivery in 3 kg or 1 kg ingots)
mAu(T+D) (100 gram per lot, delivery in 1 kg ingots) m = mini

These contracts do not have any pre-determined settlement date.

T + N contracts: Fixed Maturity Dates

Au(T+N1) (100 gram per lot, delivery in 1 kg ingots)
Au(T+N2) (100 gram per lot, delivery in 1 kg ingots)

The maturity date of the Au(T+N1) contract is 15 June.
The maturity date of the Au(T+N2) contract is 15 December.

In addition, 3 of the Main Board physical products (Au99.99 and Au99.95) and all 3 of the International Board products also trade bilaterally Over-the-Counter (OTC) between participants, but importantly, these OTC trades still settle on the SGE. Therefore the trading volumes of the OTC trades are still captured in the SGE systems and reported as part of SGE overall trading volumes. The SGE assigns a specific prefix P’ to these OTC products, but they are also sometimes written with a prefix of ‘OTC’. These 5 products are:

OTC Au99.99 / PAu99.99
OTC Au99.95 / PAu99.95
OTCiAu99.99 / PiAu99.99
OTCAu50g / PiAu50g
OTCAu99.5 / PiAu99.5

Finally as mentioned, trading in the Shanghai Gold Benchmark Price auction (code SHAU) contributes to physical gold volume on the Exchange. Since SHAU was only launched on 23 April 2016, it’s volume for 2016 only represents just over 8 months worth of trading, and not a full trading year.

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