The country's securities watchdog has issued a license to the first commodities futures trading company qualified to apply to become a member of the China Financial Futures Exchange.
The move was widely seen as an indication that the China Securities Regulatory Commission (CSRC) and the exchange are ready to establish the clearing facilities necessary for the trading of financial futures and to minimize counter-party risks.
Representatives of the Hangzhou-based Zhejiang New Century Futures Co told China Daily on Friday the company had won approval from the CSRC to do clearing business in financial futures. They said the company was preparing to apply to the exchange for membership.
The exchange has said that it plans to introduce stock index futures based on the CSI 300 indicator as the first such product. But it has not specified a target launch date.
A crucial part of futures trading, the clearing system facilitates the matching of trades, ensures smooth deliveries and keeps track of counter-party risks arising from margin trading.
Zhou Zhiqiang, a futures analyst at Great Wall Futures Co, said issuing the first license for a clearing business was a key step toward the formation of the membership system.
"Clearing members occupy a core position among the participants of the upcoming index futures market," Zhou said. "It is seen as a prelude to the introduction of all-round and special clearing members, leading to the completion of the whole membership system."
Zhang Fan, a futures analyst at Changjiang Securities, said: "As a follow-up to the flood of brokerage business licenses issued during the past two months, clearing business licenses are expected to be issued in the coming month or two."
Analysts said the decision to issue clearing business licenses had accelerated the process of introducing index futures. But the time-consuming process of assessing the qualifications of all-round clearing and special clearing members has not started.
(China Daily August 25, 2007)
