China will set up a fund worth up to 800 million yuan (US$103.9
million) to compensate futures investors in case their brokers fail
to pay back their margin, said China Securities Regulatory
Commission (CSRC) on Friday.
According to the provisional regulations on futures investors
security fund management jointly issued by the CSRC and the
Ministry of Finance, the fund will start operation on August 1.
"The fund is established to maintain social stability and
futures market security," said a commission official, "but the
regulations do not apply to futures companies which went bankrupt
or got shutdown before the issuance," he added.
Futures investors have to deposit a certain amount of margin at
their brokers depending on how the market value of the contracts
change.
The regulations said in case of margin losses due to
irregularities and mismanagement by brokers, the fund will fully
compensate investors with less than 100,000 yuan in margin
loss.
For those with more than 100,000 yuan, individual investors will
get 90 percent of their margin back and institutional investors 80
percent.
Nevertheless, investors will not receive compensation for loss
in daily futures trade and illegal trade.
"The fund is apt to protect small and medium investors," said
the official, "we hope that investors will choose well-organized
companies and know more about risks in futures trade," he
added.
Three futures exchanges located in Shanghai, Dalian and
Zhengzhou will provide the fund. The fund will be managed by an
institution designated by the CSRC and the Ministry of Finance.
The fund can be put in banks or invest in bonds, according to
the regulations.
China's futures market turned over a record 21 trillion yuan
(US$2.69 trillion) last year. Commodities traded on the country's
futures market include corn, soybean meal, sugar, zinc and natural
rubber.
As new regulations on futures trading went into effect in April,
the coverage of futures trading has been extended from commodities
futures trading to financial futures and option contract
trading.
Experts said China's futures investors will inevitably encounter
waves of restructuring and bankruptcy as its futures industry
develops, the increasingly internationalized Chinese economy are
intensifying calls for a mature futures market.
(Xinhua News Agency May 20, 2007)