Understanding SGE Ag(T+D): How China's Deferred-Settlement Silver Contract Actually Works

Why This Contract Matters

When our SGE silver premium reading moves, the price behind it is almost always coming from a single contract: Ag(T+D), the Shanghai Gold Exchange's deferred-settlement silver product. This is China's most actively traded silver product for institutional and retail participants alike, and its price behavior is what drives Chinese silver premium data.

Yet Ag(T+D) has an unusual structure that mixes elements of a futures contract, a spot contract, and a swap. Understanding it is worth the effort if you are trying to read Chinese silver market signals correctly. This guide walks through the specification, the settlement mechanics, and the reasons the contract behaves the way it does.

The Basic Structure

Ag(T+D) is quoted in Chinese yuan per kilogram. The "T+D" naming refers to the deferred settlement structure: unlike a standard spot contract that settles the next business day, Ag(T+D) allows positions to be carried indefinitely, subject to a daily settlement fee mechanism described below.

The Deferred Settlement Fee (延期费)

This is the mechanic that most surprises readers coming from a Western futures background. Unlike a futures contract which has a fixed expiry, Ag(T+D) positions can be rolled forward indefinitely. To prevent one side from accumulating unboundedly against the other, SGE assesses a daily settlement fee.

The direction of the fee depends on whether the market is net long or net short. If more traders are long than short (as measured by SGE at daily settlement), longs pay shorts a fee for the day. If more are short than long, shorts pay longs. The rate is typically small — a fraction of a percent per day — but over weeks or months, the accumulated fee can be meaningful.

The signal value of the settlement fee direction is real. When Chinese silver traders are structurally short (perhaps because of production hedging by silver refiners), the market gives long carriers a small positive daily payment for holding their positions. When speculation is heavily long, the fee reverses.

Why It Behaves Like a Futures But Prices Like a Spot

Ag(T+D) does not trade at a persistent premium or discount to the London silver spot the way a distant COMEX futures contract might. Its price gravitates toward Chinese silver spot because delivery is available any business day. If Ag(T+D) traded meaningfully above spot, an arbitrageur could sell Ag(T+D), take spot silver, deliver into the Ag(T+D) contract, and pocket the difference. This delivery-optionality anchor keeps the two prices closely aligned.

At the same time, Ag(T+D) has the leverage of a futures contract. A trader can control 15 kg of silver with roughly 10-15% margin. This attracts speculative participation that a spot-only market would not. The result is a spot-anchored price with futures-scale trading volume — a combination that gives SGE silver its unique market microstructure.

How Ag(T+D) Relates to Au(T+D)

The gold sibling of this contract is Au(T+D), which follows almost identical mechanics with different unit sizes. Au(T+D) is quoted in CNY per gram like Ag(T+D), but its contract unit is 1 kilogram instead of 15. The two contracts share the settlement fee mechanism, the deferred settlement structure, and the delivery-anchored pricing.

Where they differ is in how they connect to global markets. Chinese gold demand and Chinese silver demand have different structural drivers — gold is dominated by investment and jewelry demand plus PBOC accumulation; silver is dominated by industrial demand plus a smaller investment share. As a result, Au(T+D) tracks global gold movements more closely than Ag(T+D) tracks global silver movements. This is why our SGE gold premium series behaves differently from our SGE silver premium series over time.

The Weekend Sentinel Value

A specific data-handling issue is worth being explicit about. SGE trading is closed on weekends and Chinese public holidays. Some data feeds return a sentinel value of -2.0 for missed reads on those days. Our data pipeline filters this specifically because a -2.0 value passed through raw would generate nonsensical premium calculations.

The practical implication for readers: SGE silver premium readings on Monday may reflect the market's Friday close plus whatever happened globally over the weekend. A Monday spike is often just a repricing to catch up to global moves, not a Chinese-specific demand signal.

How to Read Ag(T+D) Behavior for Signal

Retail Access

Ag(T+D) is available to individual Chinese investors through participating banks. The minimum position (one contract) is 15 kg of silver, which at typical prices is a significant sum. This restricts retail participation compared to smaller silver products in China. Most Chinese retail silver exposure comes through paper-silver bank accounts or shorter-tenor SGE spot contracts, both of which are ultimately priced against Ag(T+D).

Non-Chinese participants generally cannot trade Ag(T+D) directly. Access is restricted to SGE members and their approved clients, and capital controls limit foreign participation. This means the price is set almost entirely by domestic Chinese participants, which is part of why Chinese silver premiums can diverge from global markets during periods of tight capital controls.

What This Site Uses

The SGE silver reading on our dashboard is derived from Ag(T+D) settlement prices, converted from CNY per gram to USD per troy ounce using contemporaneous CNY-USD FX rates and the standard 31.1035 grams per troy ounce factor. The premium is then computed against COMEX silver. When you see our SGE silver premium widen or narrow, the underlying price movement is Ag(T+D)'s.