China's new regulations on futures trading came into effect on
Sunday, extending its coverage from commodities futures trading to
financial futures and option contract trading.
The new regulations, issued by the State Council on March 16
this year, will lay a legal foundation for the introduction of
stock index futures, foreign exchange futures and option and other
financial derivatives, which will provide financial institutions
with much-needed tools to hedge risks.
Objectives in a commodities futures trading include farm
produce, industrial products, energy sources and related index
product, while a financial futures trading involves securities,
interest rates, exchange rates and related index products.
The regulations no longer prohibit financial institutions from
doing futures trading or raising funds and offering securities for
futures trading.
Seeing that securities dealers, fund management companies and
commercial banks will become the major participants in the
financial futures market, futures companies are considered as
financial institutions in the regulations.
According to the regulations, the Chinese futures market is
required to improve its risk control system by setting up a
guarantee fund and an interest compensation mechanism for futures
investors.
The regulations prescribe a series of measures to strengthen the
supervision of the futures market in order to ensure its stable and
healthy development, said Shi Jianjun, vice president of the China
Futures Association.
The China Securities Regulatory Commission (CSRC), the country's
securities market watchdog, has the authority to carry out
investigations into the market participants and examine their
transaction and financial data and bank accounts.
Fan Fuchun, vice chairman of the CSRC, said last month that
China is likely to launch the trading of stock index futures in the
first half of 2007.
Simulation trading was started in October last year to test the
trading system at the Shanghai-based China Financial Futures
Exchange (CFFE), which was inaugurated in September 2006 to become
the country's first financial derivatives exchange.
China's futures market, composed of Shanghai Futures Exchange,
Dalian Commodity Exchange and Zhengzhou Commodity Exchange and
CFFE, turned over a record 21 trillion yuan (US$2.69 trillion) last
year.
Commodities traded on the country's futures market include corn,
soybean meal, sugar, zinc and natural rubber.?
(Xinhua News Agency April 16, 2007)