China Futures Volume Surges as Brokers Climb on Looser Curbs

  • Exchange reverses some measures introduced during 2015 crash
  • Citic Securities climbs as trading activity seen picking up

Trading in Chinese stock-index futures almost doubled after regulators loosened curbs on the contracts, the latest sign of Beijing’s relaxed grip on markets as shares recover from their 2015 crash.

More than 11,600 March contracts on the CSI 300 Index changed hands on Friday, up from the 6,333 average over the past five trading sessions. Shares of Chinese brokerages advanced on the prospect of higher commissions, with Citic Securities Co. rising 1.2 percent in Hong Kong. The China Financial Futures Exchange announced relaxed position limits, lower fees and reduced margin requirements on Thursday, confirming a Bloomberg News report on the plans last month.

Chinese regulators, who clamped down on markets during the $5 trillion stock rout 18 months ago, are slowly warming to reforms as volatility subsides. Over the past three months, authorities opened the Shenzhen-Hong Kong exchange link, said they’ll push ahead with a trial for more exchange-traded fund options and pledged to increase the pace of initial public offerings.

For CSI 300 Index and SSE 50 Index futures, CFFE will lower margin requirements for non-hedging accounts to 20 percent from 40 percent. The rate for small-cap CSI 500 futures will drop to 30 percent, while trading fees for contracts that are opened and settled on the same day for all three contracts will be adjusted to 0.092 percent. The new position limit for non-hedging accounts will rise to 20 from 10.

China’s stock-index futures market, the most active in the world before the 2015 crackdown, was targeted by regulators in part because selling the contracts was one of the easiest ways for investors to make large wagers against stocks. It was also a favored product for short-term speculators because the exchange allows participants to buy a contract and then sell it in a single day, a practice that’s banned in the cash equities market.

Futures are a popular tool among institutional investors, with long-term money managers using them to make cost-effective asset-allocation changes. For hedge funds, they provide an easy way to adjust exposure to market swings.

The CSI 300 Index slipped 0.6 percent on Friday, paring its rally from a January 2016 low to 20 percent.

— With assistance by Gary Gao

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