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SCMP Reporter

The China Financial Futures Exchange is drawing up rules for  qualified investors in  stock-index futures contracts, hoping to pave the way for the long-delayed equity-based derivatives.
The exchange said  yesterday that it  had started to outline a system under which 'the proper products are marketed to the right investors'.
The move is in line with the China Securities Regulatory Commission's blueprint for setting up  a so-called 'qualified investor' mechanism that was unveiled last month.
The regulator is increasingly aware of the potential risks of derivative trading amid the  global financial crisis and is determined to shut small investors out of the futures exchange when the stock-index futures contracts are launched.
The exchange said it would select qualified players for the contracts  to protect investors.
Analysts said the move suggested the exchange  would raise the threshold for individual investors  keen to trade index futures. It was reported last year that investors with 1 million yuan (HK$1.13 million) of deposits in  a brokerage account would be eligible to trade the derivatives.
Trading is expected to be based on the CSI 300 Index,  which tracks the 300 largest companies on the Shanghai and Shenzhen exchanges.
'The exchange is doing whatever it can to push ahead with the launch of the contracts,' said Li Liejun, an official at Shanghai Jinpeng Futures. 'The reality is that brokerages and investors are losing interest.'
Sources said futures exchange president Zhu Yuchen told a recent conference that it  was hoped the derivative  would make its debut soon but added the exchange  was still awaiting final CSRC approval.
Beijing planned to launch the index futures in 2007 but  held back over concerns about market volatility, saying the derivative would be traded when the timing was right.
The Shanghai Composite Index  fell 65.4 per cent last year amid a crisis of confidence, dashing investor hopes for the new investment tool.
In 2007, the CSRC granted brokerages 54 licences  to trade  the index futures. The recent  stock market rebound heightened investor hopes for the launch of the  derivatives.
The Shanghai  index has climbed 24.2 per cent this year as investors expect an early recovery for the mainland economy.
The CSRC will also implement the qualified investor mechanism on margin trading and short-selling practices before giving a go-ahead to the new products.
Beijing was  to have launched the two derivatives in late November but  delayed them, fearing short selling would put downward pressure on the embattled market.
Select investors
The exchange will limit trading of contracts  to qualified players
The number of licences the CSRC issued to brokerages to trade index futures: 54



Mainland exchange drawing up rules for index futures trade