The Shanghai Futures Exchange (ShFE) has unveiled a comprehensive set of proposals aimed at opening China’s commodities markets to foreign hedge funds and institutional investors, as part of a broader push to internationalise the renminbi, according to a report by Reuters.
The exchange has released 34 draft reforms designed to streamline foreign access to domestic futures markets, including allowing direct participation by overseas brokers and funds – a major shift from the current model requiring onshore intermediaries.
The draft rules, now open for public consultation until 4 June, would also permit margin deposits in foreign currencies, including the US dollar—potentially reducing friction for cross-border investors and enhancing liquidity across key contracts.
“This is a constitutional shift for ShFE,” said Tiger Shi, CEO of BANDS Financial, a brokerage active in China-access strategies. “Foreign investor access to all of ShFE’s products is now on an accelerated path.”
The reforms cover 18 core contracts across industrial metals and other commodities – including aluminium, nickel, and copper cathodes – and are seen as part of a long-term strategy to challenge the London Metal Exchange’s dominance in global base metals pricing.
The initiative comes as global hedge funds ramp up interest in arbitrage strategies between ShFE, LME and CME contracts amid rising geopolitical risks and tariff threats. “These changes open the door for sophisticated spread trades, particularly in copper and nickel, where dislocations have created significant alpha opportunities,” said Alastair Munro, Senior Metals Strategist at Marex.
ShFE’s proposals also align with recent reports that it may open domestic nickel futures to foreign investors this year, instead of launching a parallel contract on its International Energy Exchange. This would put ShFE in more direct competition with the LME, whose credibility took a hit in 2022 when it suspended nickel trading during a historic short squeeze – leading to a high-profile lawsuit by hedge fund Elliott Associates.
The LME declined to comment on the developments.
