The China Financial Futures Exchange (CFFEX) yesterday said the China Securities Regulatory Commission has approved the trading rules, a crucial step toward the launch of the mainland's first index futures market.

 

CFFEX has said there is no specific target date for the launch, but industry insiders have predicted it will be sometime this year.

 

The approved trading rules cover trading practices, clearing procedures, members' rights and obligations, risk control, information management, hedging operations and the investigation of and penalties for irregular trading.

 

The contract specifications for CSI300 futures as disclosed earlier defined the contract size, contract multiplier, tick value, margin requirement, daily price swing limits, final trading day and delivery date.

 

Each point of the CSI Index, on which the contract is based, is valued at 300 yuan (US$39.39), and the margin level of trading is set at 10 percent of the contract value.

 

Based on the closing price of 4040.48 for the CSI300 index yesterday, the value of one futures contract is 1.2 million yuan and the margin charged for each contract is 121,000 yuan (US$5,888.65).

 

The tick value, or the minimum price movement registered, is set at 0.2 points while the daily price rise and fall limit is set at 10 percent of the settlement price on the previous trading day.

 

It is widely believed that the approval of the trading rules has cleared one of the final hurdles in the long preparation process that has tested the patience of many prospective participants, particularly institutional investors who would welcome an effective hedging instrument to minimize risks in an increasingly volatile stock market.

 

The assessment of members' qualifications is expected to be the next focus for CFFEX in coming months.

 

(China Daily June 28, 2007)