for the new Chinese equity index future has continued to build
after its strong launch on Friday April 16.
contract, the first listed financial derivative in China for
more than a decade, tracks the 300 leading 'A’
shares on the Shanghai and Shenzhen markets, weighted by
58,500 CSI 300 Futures were traded at the China Financial
Futures Exchange on the first day. Volume rose to 124,000 on
Monday and 153,000 on Tuesday. On Wednesday there were 121,000
trades and on Thursday 140,000.
a very strong start for a contract that some had feared would
not catch on because of the high barriers to entry deliberately
imposed by the Chinese regulators, for fear of rampant
contract is worth Rmb300 times the valaue of the index, now
about 3,200, so Rmb960,000 ($140,000). That means, according to
FOi calculations, the total notional value traded through the
596,000 contracts exchanged in the first week has been roughly
comparison, the daily average traded value in
Eurex’s Euro Stoxx 50 Index Futures in March was
Eu39.6bn ($53bn). That means the new Chinese contract is
already trading, in cash terms, about a third as much as the
Euro Stoxx 50.
restrictions imposed by the China Securities Regulatory
Commission include a requirement that every
retail investor pay a Rmb500,000 ($73,000) deposit.
addition, trading is done on pre-margin at a rate of about 15%
of the contract value. The actual margin required by the
exchange is 12% but broker fees will increase the figure to 15%
kinds of trader permitted to use the contract are also
restricted — for example, Qualified Foreign
Institutional Investors are not allowed to trade it.
CSRC does not intend for the new CSI 300 contract to be used as
an instrument for profit but rather as a hedging tool,"
Owen, China chief representative in Newedge’s
Shanghai representative office.
despite the best efforts of the CSRC, the pattern of open
interest in the contract suggests that market participants are
not just using the futures as a long term risk management
instrument to hedge exposure to the Shanghai and Shenzhen
stockmarkets. Rather, the Chinese traders appear to have
engaged in substantial intraday activity.
end of the first day’s trading, open interest
stood at 3,590 contracts, about 6% of the volume traded that
day. Open interest climbed every day during the week, to reach
6,716 at the end of Thursday – but that was only 4.8%
of that day’s trading volume and 1.1% of all
trading up to that point.
still early stages, but we would have liked to see more
participation from institutional clients," Owen said. "It seems
clear to me that investors are currently not using the index
futures as a natural hedge against their stock portfolios. On
the other hand, the relatively low open interest is also an
indication of the low risk appetite of the individual
investors, which is good."
notable pattern in the trading so far is that the great
majority of liquidity is in the front month (May 2010)
contract. That contract had about 92% of the trading volume in
the first week and 79% of the open interest – though
there was trading every day in each of the June, September and
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Hay, London firstname.lastname@example.org
Newedge, FOi calculations