Bloomberg News

China Approves UBS-SDIC Venture for Commodity Arbitrage Trade

February 14, 2012

Feb. 14 (Bloomberg) -- China has approved a joint venture between UBS AG and the parent of the State Development & Investment Corp. to become the first fund to trade commodity futures through a managed account product.

UBS SDIC has been approved for commodity futures arbitrage trading, Vicky Su, a portfolio manager at the fund, said by e- mail. SDIC is an investment company owned by the Chinese government.

The move may signal further investment inflows into commodities markets in China, which trades futures including copper, gold and soybeans on three exchanges in Shanghai, Dalian and Zhengzhou. Data from the China Futures Association showed the volume of all commodities futures tumbled 34 percent to 1 trillion lots last year, after the government clamped down on speculative trading.

“This is a significant start,” Che Hongyun, chief analyst at Galaxy Futures Co., said by phone from Beijing. “The introduction of institutional investors to commodity futures in China will help the market mature, where previously only speculators and industry hedgers were the players.”

The approved product only allows arbitrage trading between domestic commodity futures, UBS SDIC’s Su said.

--Helen Sun. Editors: Richard Dobson, Jarrett Banks

To contact Bloomberg News staff for this story: Helen Sun in Shanghai at hsun30@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net


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