China regulators ease stock index futures curbs, unwinding tightening measures imposed 18 months ago

Brokerage shares surged in Hong Kong trading on Friday after China relaxed curbs on stock-index futures trading, unwinding administrative measures imposed 18 months earlier in a bid to curb speculation and stem a stock market rout.

In afternoon trade on Friday, Luzheng Futures soared 11.1 per cent to trade at HK$1.91. Central China Securities jumHolly Futures jumped 2.3 per cent to HK$1.82. CITIC Securities also gained 1.8 per cent to HK$17.28.

Starting Friday, the Shanghai-based China Financial Futures Exchange (CFFE) will increase the daily cap of new positions in non-hedging accounts from 10 contracts to 20 contracts, according to a statement on Thursday evening.

For futures contracts based on the CSI300 and the SSE 50, the CFFE will cut margin requirements for non-hedging accounts to 20 per cent of the contract value from a previous 40 per cent.

The requirements for non-hedging accounts for the CSI Smallcap 500 Index futures will also drop to 30 per cent from 40 per cent.

The exchange will also cut transaction fees for contracts based on the above three indexes that are opened and settled on the same day to 0.092 per cent of transaction value.

It was a “sound and orderly” adjustment “in accordance with” the plan of the China Securities Commission, the CFFE said in the statement.

Regulators imposed curbs on stock index futures trading during the stock market turmoil in August 2015. Trading in the stock index futures market has since fallen sharply.

“I don’t expect the market liquidity to improve significantly in the short term, but it indicates a change in the regulators’ attitude,” said Li Zhixiang, an analyst for Orient Futures. “It’s very possible they will gradually relax the stock index futures rules.”

“As investor confidence recovers, trading volumes of the stock index futures market will rebound,” Li said.

Futures companies will be a major beneficiary of the policy, as their profitability for this year will receive a “significant boost”, Li said.