(Yicai) May 27 -- The Osaka Exchange has listed Shanghai natural rubber futures, marking a milestone in financial market cooperation between China and Japan.

The contracts, whose underlier is the price of natural rubber futures listed on the Shanghai Futures Exchange, began trading on the OSE yesterday. The first contracts to be listed were the three most-actively traded, those expiring this September and in January and May of next year.

The settlement price is the delivery price of natural rubber futures calculated by the SHFE multiplied by JPY100 (70 US cents), and as the contracts are settled in cash, there is no physical delivery risk. Exchange rates will not be considered for the calculation.

The newly listed futures give Japanese and international businesses with rubber inventories in China a way to hedge price risk, the OSE said in a press release, adding that they also help boost liquidity in the OSE’s existing rubber futures by enabling arbitrage between the two countries’ futures markets.

The listing “not only provides investors with a new way of accessing Shanghai’s rubber futures market but also contributes to the stabilization of global natural rubber futures prices through arbitrage trading,” said OSE President and Chief Executive Officer Ryusuke Yokoyama.

“Furthermore, while Shanghai and Osaka are official friendship cities, I believe that the listing of this product will not only strengthen the relationship between the two cities but also contribute to the advancement of internationalization in Osaka Prefecture and Osaka City,” Yokoyama added.

“This collaboration between the SHFE and the OSE is a concrete step taken by the Chinese futures market toward high-standard opening up,” said SHFE CEO Lu Dongsheng.

“The Shanghai rubber price creates new risk management possibilities for rubber industries around the world,” Lu pointed out. “The SHFE looks forward to further enhancing the futures market’s ability to serve the real economy.”

The two exchanges signed the agreement for listing Shanghai natural rubber futures on the OSE in January.

Editor: Futura Costaglione