Stock index futures trading in mainland step closer to reality
The mainland stock exchanges, futures exchange and clearing companies signed an agreement on cross-market regulations yesterday, marking an important step towards the launch of stock index futures.
The agreement showed the China Securities Regulatory Commission is putting the final touches to preparations for the financial derivative, two days after Beijing said conditions were ripe for its introduction.
'The efforts on setting up regulations, rules and the operations of the financial futures exchange to the signing of the regulations agreement over the past year showed preparations for the index futures are proceeding smoothly,' CSRC vice-chairman Tu Guangshao said.
Analysts said cross-market regulations were needed to oversee daily operations and weed out irregularities on the capital markets because rampant trading would undermine the financial industry.
The Shanghai and Shenzhen stock exchanges, the China Financial Futures Exchange, China Securities Depository and Clearing as well as a centre that monitors deposit accounts at futures brokers signed the agreement yesterday in Shanghai, the CSRC said.
The parties involved 'need some time to gel', said Yu Yiran, an official with China International Futures. 'The agreement is a good sign that the regulators are doing their job on par with international practice.'
Analysts said the joint regulations could help prevent risks and better police the market. The exchanges could share data to look for evidence of any account being suspected of price manipulation, they said.
The CSRC is introducing index futures to offer more investment options and a hedging tool to investors.
The first financial derivative, to be based on the Shanghai-Shenzhen 300 Index, was in the pipeline, brokers and analysts said.
Some market observers predicted it could be launched next month.
Industry players said the regulations were necessary but not time-consuming. 'They had the data system in place already,' said Liu Zhongyuan, the deputy general manager of Topwin Futures Brokerage. 'Now the preparations are on the right track.'
The regulators were expected to issue a large number of licences to brokerages this month and next month, the China Securities Journal reported last week. More than 40 brokerages had applied and the index futures could start trading when 100 licences were granted, industry insiders said.