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Timing for index futures still a mystery

By Dong Zhixin (chinadaily.com.cn)
Updated: 2007-04-13 16:52

China published three rules concerning futures Thursday, marking another step forward toward the launch of long-anticipated stock index futures.

However, the actual timing of the introduction of the new financial products remained a mystery, with speculations ranging from May to October.

The three rules - governing futures exchanges and futures companies and issues concerning accounting firms' involvement in securities and futures businesses - take effect on April 15.

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These rules are intended to complement the country's newly revised Regulation on Futures Trading, which extended its coverage from commodities futures trading to financial futures and option contracts trading, paving the way for the launch of stock index futures. The revision, published in March, becomes effective also on April 15.

Expectations about stock index futures are widely considered as a major factor in the repeated hitting of new highs of China's stock market in the last few days. But there are different versions as to when the new products would actually start trading on theShanghai-based China Financial Futures Exchange.

The regulators would try to launch the stock index futures in the first half of the year, said Fan Fuchun, vice chairman ofChina Securities Regulatory Commissionon March 4.

The Caijing Magazine narrowed the timeline to May, which is in line with overall market expectations. "The most possible time is early or mid-May," a source close to the decision-makers was cited as saying by the magazine on March 19.

However, reports challenging that kept surfacing lately, citing technical, policy and political factors.

The stock index futures is unlikely to be launched in the first half of the year due to technical and policy reasons, theBeijingNews reported last Friday, citing sources with a major futures company.

The testing version of the trading system, released nearly half a year ago, does not allow for an automatic forced liquidation, which is important for the futures companies, the newspaper said, adding that this problem could only be solved by the end of June.

The policy reasons referred to the fact that complementary rules to the Regulation on the Trading of Futures have not been published, not leaving enough time for the exchange to release its trading and clearing rules, to approve member applications and for the members to get prepared.

Fang Quan, a senior market analyst, believed that the launch may be delayed to the fourth quarter due to political considerations.