CHINA'S central authorities and the Shanghai and Shenzhen stock exchanges have separately announced provisional regulations and restrictions on bond futures trading in a concerted attempt to clean up the scandal-ridden fledging market. Broad regulations unveiled over the weekend by the Ministry of Finance spelt out the conditions for companies and dealers dealing in bond futures, delivering a severe blow to illegal exchanges which have sprouted throughout the country to trade in the instrument. Putting an end to a turf war, the regulations said the China Securities Regulatory Commission (CSRC) would be chief watchdog of the futures market, with the Ministry of Finance and the China Securities Association taking on the overall legal regulatory functions. The regulations are expected to form the basis of the first national futures law, which will set out futures categories to be traded and conditions under which brokers can operate futures businesses. Analysts said the long overdue regulations were announced as a key step to bring under control the sizzling futures sector, while attempting to rationalise and liberalise the market. With the stock markets in the doldrums, trading in government bonds, launched late last year, has become a fad as investors try to maximise their returns. But the lack of a proper legal framework means the bond market has seen more than its fair share of scandals in the past few months. The latest to shake the market happened last Thursday when trading in one of the bonds shot through the roof. On Friday, mainland regulators launched an investigation into Shanghai International Securities (SISCO), China's largest brokerage, and several other brokerages for alleged violations of trading rules, which led to a record trading volume of about 853.99 billion yuan (about HK$773.71 billion) in treasury bonds. Shanghai International (HK), in an announcement yesterday, said its parent company SISCO had confirmed that it was being investigated. 'SISCO has confirmed to the company - Shanghai International (HK) - that the investigations . . . are still in progress.' SISCO holds about 55.35 per cent in Shanghai International (HK). To stave off yet another scandal, the Shanghai and Shenzhen exchanges are restricting futures trading and raising fines for those violating the rules. Since last Friday, the Shanghai exchange has placed a ceiling on any futures price fluctuations over fifty cents and on the number of contracts a person can hold. Brokerages are reminded that they are not allowed to hold more than 300,000 contracts at any one time while individuals are limited to no more than 30,000 contracts. The Shanghai rules also state that brokerages cannot borrow seats from one another or will face fines and cancellation of trades by unauthorised traders with borrowed seats. The Shenzhen Stock Exchange, in a separate announcement, said from today, the deposit for futures trading will be raised to a minimum of at least 300 yuan to 500 yuan, depending on the types.