MFA Managed Funds Association : Chinese Futures Contracts May Open To Foreign Investors

Posted on January 8, 2015

China's Securities Regulatory Commission (CSRC) has proposed draft guidelines potentially allowing foreign brokerages and investors access to futures contracts in that country. The proposed guidelines come amid efforts to bring more experienced investors into China's marketplace, according to analysts. Doing so, the CSRC said, would help improve pricing and risk controls in what has been seen as a volatile - though profitable - market.

Crude oil futures will be, according to the guidelines, the first product available to investors. Details on other futures contracts, however, were not provided, but the CSRC said the opening would be gradual. The draft guidelines are available for public comment through the end of the month.

The first futures market launched in China was nearly 25 years ago and prone to "rampant speculation and manipulation, often resulting in extreme price volatility," according to a report in the Wall Street Journal.

The executive director of an investment bank with knowledge of the Chinese markets said would help bring the nation's markets more in line with foreign counterparts and help domestic companies improve their technology.

The possible opening of China's futures markets follows November's launch of a new trading program, which opened the country's markets to foreign investors through the Shanghai-Hong Kong stock connect program. The changes are part of a larger trend to transform Chinese markets from one largely dependent upon smaller retail investors to one with more institutional investors.