China Should Normalize Stock Index Futures Trading, CSRC Official Says
Xu Wei
/SOURCE : Yicai
China Should Normalize Stock Index Futures Trading, CSRC Official Says

(Yicai Global) July 24 -- China will work to normalize trading in stock index futures in line with the risk management needs of Chinese and foreign securities investors, state-backed news site The Paper reported the vice chairman of China Securities Regulatory Commission Fang Xinghai as saying.

He was speaking at the inauguration ceremony of a futures company executive training program organized by China Futures Association.

Restrictions on trading in stock index futures were imposed three years ago when regulators raised the margin required for non-hedged index futures positions to 40 percent, and closeout charges were hiked by 0.023 percent. The daily trading volume was capped at 10 lots for non-hedging customers.

To a certain extent, the move will provide support for the Chinese stock market, market insiders predict.

"It's hard to believe that trading of stock index futures will be normalized in one go as rumors suggest, but it's an appropriate time to talk about this," said the asset management head of a major futures company in south China, adding that the new regulations are a strong and clear foundation for the market.

"When the foundation is plain sight, no one can make money by shorting on shares, so the suggestion to lift the ban on stock index futures now will help ensure a smooth transition," he added.

Similarly, a source at a leading Beijing-based futures firm pointed out that lifting the ban on stock index futures now would help create more hedging room for institutions entering the market, given the recent sluggish performance of China's A-share market. The news will also bolster sentiment among retail investors as well.

At present, the cost of trading is still high when it comes to stock index futures in the domestic market, and market liquidity still needs to be further improved, said Hu Zheng, chairman of China Financial Futures Exchange in a statement in late May. This kept the market from properly fulfilling its functions and made it difficult to meet investors' risk management needs.

Editor: William Clegg

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Keywords: CSRC , Stock Index Futures