Relaxation on index futures ruled out by exchange
CFFEX denies reports that restrictions imposed during last summer’s stock market crash are to be lifted
China’s futures exchange has denied reports it is planning to relax the restrictions introduced on stock-index contracts following last summer’s market crash.
Except for trading on the China Financial Futures Exchange (CFFEX) for hedging purposes, investors are still only allowed to open a maximum 10 positions on a single contract, compared with the previous 600. Anything above that is considered abnormal trading.
The restriction was introduced to cap short-selling that the China Securities Regulatory Commission (CSRC) blamed for a boom-to-bust cycle starting in June last year, which eventually wiped $5 trillion worth off the value of shares two months later.
Index futures are futures contracts on a stock or financial index. They are a major tool used in “algo,” a popular quantitative investment strategy.
Beijing launched index futures at the CFFEX in 2010, creating a hedging tool and arbitrage system for institutional investors.
During the strong A-share rally between October 2014 and June 2015, the Shanghai-based financial futures exchange was Asia’s largest bourse for index futures in terms of turnover.