The establishment of a cross-exchange supervisory system for
equity index futures in China could see the contracts trading
as early as September. The countrys State Council stated
conditions required for the launch had been met following the
establishment of the supervisory system, removing one of the
final barriers to trading. While this could see contracts
trading as soon as next month no target date has yet been
Meanwhile, the pace at which trading licenses are being granted
by China Securities Regulatory Commission (CSRC) has reinforced
the thinking of some observers who think that the market could
be up and running within a month. The regulator granted the
first 40 licences to trade on China Financial Futures Exchange
(CFFE) in the last month, with sources in the country
suggesting that the first products will open for business
the exchange when the level passes 100.
The agreements to jointly supervise stock and securities
markets were reportedly signed on 13 August by CFFE, Shanghai
Stock Exchange, Shenzhen Stock Exchange, China Securities
Depository and Clearing Corporation and China Futures Margin
Monitoring Centre. They are believed to cover issues of risk
pre-warning and control, information exchange and cooperative
investigation of potential market issues.
Following the approval of rules for financial futures trading
by CSRC in April (see FO Week 20/04/07), the development of a
market oversight system was believed to be the last remaining
regulatory hurdle to the launch of equity index futures on
CFFE. With government figures concerned that futures trading
could cause volatility in Chinese stock markets, and with the
country also lacking a short-selling mechanism, cross-market
cooperation is understood to have been a vital
Although the progress was welcomed by international traders,
the series of delays over recent months means the market
remains cautious. One Asian-based trading firm executive told
FO Week, Although weve had false dawns before
I really think this might be the breakthrough. Even if it is,
though, we will still be taking a watching brief for now and
certainly want to see a liquid domestic retail market built up
before we jump in with both feet.
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