Mainland bond future simulations to start soon

PUBLISHED : Friday, 10 February, 2012, 12:00am
UPDATED : Friday, 10 February, 2012, 12:00am


The mainland has taken a big step towards relaunching government bond futures, kicking off simulated trading of the derivative just one month after the securities regulator announced plans to introduce more futures contracts to the market.

The Shanghai-based China Financial Futures Exchange (CFFE) said yesterday that trading simulation of the bond futures would begin on Monday, 'a move to rev up preparations' for the contract.

The move signals the imminent launch of the new hedging tool for the fast-expanding fixed-income market, and analysts expected official trading to debut within the coming months.

Simulated trading of a new product on the capital market normally means the regulators are putting the final touches to preparatory work.

If the relaunch of government bond futures happens soon, following a 17-year hiatus, it would demonstrate the ability of newly-appointed China Securities Regulatory Commission (CSRC) chairman Guo Shuqing to enforce market liberalisations.

Guo said in mid-January that the regulator was studying the reintroduction of bond futures to the mainland's capital market.

In stark contrast, it took the CSRC three years between 2007 and 2010 before stock index futures were officially launched at the CFFE.

The mainland's securities regulator has long been spooked by fears of runaway investment in the financial futures market after a scandal involving bond futures in 1995 forced the government to halt trading.

On February 23, 1995, Shanghai Wanguo Securities massively exceeded a ceiling on its futures position that triggered a huge sell-off. It cost the government more than 1 billion yuan (HK$1.2 billion) to cover Wanguo's losses.

Last month, Guo said the CSRC would speed up preparations for new commodity futures contracts.