Derivatives Trading may Make China Busiest Futures Market

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Apr. 12 – China’s increased trading in equities from index futures may help China to surpass the United States as the world’s busiest stock market.

According to the China Financial Futures Exchange, China will start trading of contracts based on the CSI 300 Index on April 16, tracking the 300 biggest stocks on the Shanghai and Shenzhen stock exchanges.

Vice premier Wang Qishan said last Thursday at the opening ceremony for the derivatives market, that regulators would prioritize risk control during the Shanghai launch of index futures, and must achieve a balance between liberalization and regulation. This will help institutional investors and provide a tool for managing risks.

“It’s possible for China to overtake the US in terms of trading volumes, and index futures trading is one positive factor that will increase transactions,” Liang Jing, an analyst at the Chinese brokerage firm Guitai, said last week. “China is still a growing market, and there are still lots of derivatives to come and lots of good companies to be listed.”

The margin requirements for index futures have been set at 12 percent by the China Securities Regulatory Commission and 3,000 investors have already opened new accounts at the new futures exchange. Qualified foreign institutional investors in A-shares remain barred from index futures trading.