Chinese regulator bans futures brokers from providing margin financing

PUBLISHED : Thursday, 10 November, 2016, 9:46pm
UPDATED : Thursday, 10 November, 2016, 11:03pm

China’s futures brokers have been banned from providing margin financing, part of tighter measures aimed at cracking down speculation in the overheated financial market, according to a report in state-owned Shanghai Securities News.

The move by the China Securities Regulatory Commission comes amid other sweeping measures by the country’s major commodities exchanges this week, six months after the government stepped in to try to deflate a speculative bubble in the market.

On Wednesday, the Zhengzhou Commodities Exchange raised the margin requirement for trading thermal coal futures for the fourth time in less than three weeks.

The bourse also increased transaction fees for intraday trading of coking coal and coke as well as broadened the daily limit for price movements to check volatility.

Similar measures were taken at the Dalian Commodities Exchange, which also raised the transaction fees for reinforced steel bars and rubber.

Meanwhile, the Shanghai Futures Exchange increased the transaction fees for trading futures contracts in rebars, rubber and tin.

It also urged investors to trade rationally and maintain market stability amid a rise in the volatility of some contracts.

Separately, the publisher of a key coal benchmark has suspended two price indices due to unusual price movements.

The new spate of measures followed sharp increases in the futures prices of the so-called ferrous complex of steel, iron ore, coking coal and coke.

Government fiscal and monetary stimulus moves this year have revived construction activity in the real estate and infrastructure sectors, leading to a price surge in steel, iron ore, coking coal and coke.

The new measures appeared to have an effect as the prices of major futures contracts fell yesterday, with the most traded thermal coal futures down 0.67 per cent after the cap on price movement.

Thermal coal had risen by 25 per cent in the month to November 7, raising its gains so far this year to 121 per cent.

It is not the first time commodity traders have been imposed with restrictive regulatory measures. The exchanges took similar action about six months ago after short-term retail investors piled into the market, driving up prices of all commodities and stoking fears of a bubble.

The feverish trading spread to agricultural futures, prompting warnings from the government.

Fang Xinghai, the deputy head of the CSRC, called for a tighter oversight of agricultural futures amid concern that speculation was fuelling the unusual price movement.

Fang said the market should be monitored closely and participants made aware of the rising risks.

The three futures exchanges should also look out for unusual trading and price changes as well as large capital flows, he said.