Shang Fulin, chairman of the China Securities Regulatory
Commission (CSRC), said on Saturday that the country has basically
completed system and technical preparations for the launch of its
first stock index futures.
"The commission would continue the final preparations before
officially introducing the stock index futures," Shang said at the
2007 China Financial Derivatives Conference held in Beijing.
The development of financial derivatives can improve the
country's financial efficiency and help the country better handle
financial risks," Cheng Siwei, vice chairman of the Standing
Committee of the National People's Congress, told the conference,
stressing the development should go in a "steady way".
Cheng said the stock index futures is for the time being the one
most ready for launch.
He said the introduction of the stock index futures would help
boost the smooth development of China's stock market by enabling
investors to profit from their anticipation of a share price
fall.
However, the threshold for investment in the stock index futures
should be set at a relatively higher level to avoid irrational
investors, and the threshold could be lowered when the market
becomes mature, Cheng said.
The country's new regulations on futures trading came into
effect in April, extending its coverage from commodities futures
trading to financial futures and option contract trading.
This laid a legal foundation for the introduction of the stock
index futures, foreign exchange futures and option and other
financial derivatives, which will provide financial institutions
with badly-needed tools to hedge risks.
Simulation trading was started in October last year to test the
trading system at the Shanghai-based China Financial Futures
Exchange (CFFE), which was inaugurated in September 2006 to become
the country's first financial derivatives exchange.
Shang said the commission will continue providing training and
risk-control education for institutional investors and managers
that are interested in the stock index futures.
The CSRC offered a training course on stock index futures
transaction regulations in southwestern China's Guizhou Province
between September 27-28, with more than 90 industry
participants.
Cheng suggested that the country's institutions of higher
learning should train more Financial MBA (FMBA) graduates for the
emerging domestic financial derivatives market.
Cheng said the country might introduce the interest rate futures
with the gradual marketization of the country's interest rates,
which means market-determined interest rates, rather than freely
floating rates.
The launch of the foreign exchange futures would need still
longer time, Cheng said.
The country's futures market, comprising Shanghai Futures
Exchange, Dalian Commodity Exchange and Zhengzhou Commodity
Exchange and CFFE, turned over a record 21 trillion yuan (US$2.81
trillion) last year.
(Xinhua News Agency October 28, 2007)