- New futures trading to coincide with cash market hours
- Move follows 99% drop in volumes after curbs imposed
China will cut trading hours for stock-index futures contracts next year as authorities step up measures to limit volatility in the nation’s financial markets after a $5 trillion rout.
Trading in the morning session will start 10 minutes later at 9:25 a.m. from January, in line with the cash market, while the afternoon session will end at 3 p.m., 15 minutes earlier, the China Financial Futures Exchange said in a statement on Friday. The change will affect futures contracts linked to the CSI 300 Index, CSI Smallcap 500 Index and the Shanghai Stock Exchange 50 A-Share Index.
Volumes in CSI 300 and CSI 500 futures hovered near record lows last week after falling 99 percent from their June highs. Ranked by the World Federation of Exchanges as the most active market for index futures as recently as July, liquidity in China has dried up as authorities raised margin requirements, tightened position limits and started a police probe into bearish wagers.
“It will curb volatility,” said Wu Kan, a fund manager at JK Life Insurance Co. in Shanghai. “It can prevent wild movements on the futures from affecting the spot market because of the time advantage.”
China will also start a stock-market circuit breaker at the beginning of next year. Under the new mechanism, a move of 5 percent in the CSI 300 will trigger a 15-minute halt for stocks, options and index futures, while a move of 7 percent will close the market for the rest of the day, the Shanghai bourse said in a statement on its website Friday.
Turmoil in China’s stock market sent a gauge of price swings to its highest level since 1997 earlier this year as leveraged investors unwound bullish bets on concern valuations were unjustified amid slowing economic growth. To combat the plunge, the government banned share sales by major investors and allowed more than 1,400 companies to suspend trading.
Authorities have targeted futures because selling the contracts is one of the easiest ways for investors to make large wagers against stocks. It’s also a favored product for short-term speculators as the exchange allows participants to buy and sell the same contract in a single day.
— With assistance by Shidong Zhang