(Yicai) Jan. 9 -- Many Chinese futures exchanges have said they are lowering their handling fees, with the exception of frequent pre-programmed trades which is likely to particularly affect foreign institutions that often conduct such transactions, Yicai learned from insiders in the private equity fund management and futures sectors.

Dalian Commodity Exchange and Zhengzhou Commodity Exchange have cut their handling fees by 30 percent for some futures and options contracts, according to market insiders. However, customers registered for specific pre-programmed tradings, which many foreign institutions are, will not have their fees reduced.

“This exclusion will have a huge influence on institutions engaged in highly frequent quantitative tradings,” an executive at a large futures company told Yicai.

Futures bourses used to partially refund transaction fees to futures companies to boost their business, the insiders said. The proportion of refunds varies depending on the transaction volume and the category of trading targets.

But a rumor was circulating on social media on Jan. 4 saying that futures bourses are no longer issuing refunds. That day, the futures market plunged. The share prices of the four futures firms listed on the mainland stock market also tumbled, particularly Nanhua Futures [SHA:603093] which slumped by almost 6.3 percent that day.

“The revenue our firm earns through the refund of transaction fees accounts for around one third of total business revenue,” an expert at a small futures company told Yicai. The company will lose this portion of revenue, if bourses cancel refunds or do not lower the handling fees.

Previously, some futures firms would return part of the refunded transaction fees to their customers. If bourses do not trim transaction fees but cancel refunds, these clients will not get a share of this revenue.

Quantitative and highly frequent trades are universally seen in matured markets, Yi Huiman, former chairman of the China Securities Regulatory Commission said in 2021.

However, they also easily cause the convergence of transactions, intensified fluctuations, violations of market fairness and many other issues while at the same time increasing their market liquidity and enhancing pricing efficiency. On such a basis, how to evaluate capital structures that enter the market and new types of trading tools as well as how to optimize regulation targeting new types of transactions have become topics worth discussing.

Editor: Kim Taylor