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Exchange drafts rules for stock-index trading

CHINA'S Financial Futures Exchange is drafting rules for investors to trade long-awaited stock-index futures, Xinhua news agency quoted an unidentified official of the exchange as saying yesterday.

The exchange will arrange for more than 50 futures companies, nearly half of its qualified members, to examine and improve the trading system by opening mock accounts, the report said.

An official said the system is aimed at qualified investors who have adequate knowledge, professional skill, strong economic strength and risk tolerance.

Futures companies should select clients prudently and guide them to trade the new product rationally to stabilize the market, the official said.

China set up its futures exchange in 2006 in preparation for the debut of futures trading, which will be based on the CSI 300 index that tracks the top 300 Chinese mainland-listed firms.

Index futures, often used as hedging tools, allow an investor to make bets on the direction of an entire index rather than individual stocks. Like margin trading and short selling, they are speculative trading mechanisms and require sophistication on the part of investors.

The regulator hasn't released a timetable of the new product.

China is also preparing to launch a Nasdaq-style index for smaller start-up companies and to introduce margin selling.

Nicole Yuen, head of China equities at UBS, last month said it is not a good time now for China to start stock-index futures and other derivatives due to a lack of investor confidence and a volatile market.

The key Shanghai Composite Index sank more than 65 percent last year, hit by the global and domestic economic downturn and financial fears.


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