Chinese financial regulators have approved, ‘in principle,’ the introduction of stock index futures — trading on margin and short selling — investment mechanisms that are regularly used in New York, Chicago, London and many other exchanges, according to a statement posted on the China Securities Regulatory Commission [C.S.R.C.] website Friday.
It has been nearly 15 months since China’s securities watchdog last said it would soon launch a stock index futures under a trial scheme. Apparently, introduction was stalled as regulators dedicated more time studying the impact of promoting a multi-level capital market system, and how such implementation would impact mainland’s financial markets.
Friday’s announcement means that for the first time traders in China will have more options than simply buying and selling their favorite stocks. They will now have the ability to profit from declines in shares prices and borrow money to trade stocks on margin.
Both margin trading and short-selling will be limited however, to about a dozen securities firms and only 70 to 80 stocks will be allowed to be traded in the initial stage to control risks.
C.S.R.C said on its Web site that it may take three months to complete preparations for the new investing tools to become available. According to Bloomberg, stock index contracts based on China’s CSI 300 Index could begin trading in March.