The State Council published on Friday the country's new
regulations on futures trading, extending its coverage from
commodities futures trading to financial futures and option
contracts trading.
The new regulations, which will come into effect on April 15
this year, no longer prohibit financial institutions from doing
futures trading or raising funds and offering?warranty for
futures trading.
Futures companies will be considered financial institutions when
securities dealers, fund management companies and commercial banks
become the major participants in the financial futures market, said
an official with the Legislative Affairs Office of the State
Council.
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, according to the
regulations.
The regulations, with the scope of application expanded, lay a
legal foundation for the introduction of stock index futures and
strengthen the supervision of the futures market, said Shi Jianjun,
vice president of the China Futures Association.
Fan Fuchun, vice chairman of the China Securities Regulatory
Commission, said earlier this month that the country 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, which was inaugurated in September 2006 to become the
country's first financial derivatives exchange.
Currently investors can only profit when the stock index goes
up. With the introduction of index futures, investors will be able
to make money when the index falls.
Market watchers believe the introduction of such derivatives
will provide financial institutions with a much-needed tool to
hedge risks but may also spur speculation and widen volatility.
(Xinhua News Agency March 17, 2007)