January 18, 2006

 

China to launch soybean options after regulation change
 

 

China will launch commodities options--the first of which are likely to be in copper, soybean, and wheat--after modifying regulations of futures, officials said Jan 17.

 

"We're working on the necessary technical preparations, such as developing a trading system, but there is no timetable," said one official with the futures department of the China Securities Regulatory Commission (CSRC).

 

A change in existing futures regulations is also needed as they do not currently cover options, he said.

 

China is most likely to launch options in copper, soybean, and wheat, whose futures contracts are traded on the Shanghai Futures Exchange, Dalian Commodity Exchange, and Zhengzhou Commodity Exchange respectively, said an official with Dalian Commodity Exchange.

 

"It is mainly because they are mature commodities which have been traded for a long time, and a have big trading volume," he said.

 

The CSRC has set up a special committee for the launch of options. The committee will be in charge of developing the electronic system and coordinating the three exchanges' work, Li said.

 

He said system development is almost finished, but revisions and technical decisions remain, such as whether to adopt European- or US-style options.

 

The three exchanges must still formally apply to the regulator to launch options, but the regulator's involvement suggests a coordinated launch some time this year, Li said.

 

"Shang Fulin's (the chairman of the CSRC) comments in an internal working conference last week were notable as the wording reflects an acceleration in development of options and futures which had not been adopted by the regulators before," said Zhang Lei with Zhengzhou Commodity Exchange.

 

 

The CSRC wants to speed up the development of new futures for commodities, launch commodities options, and study financial derivatives such as stock index and bond futures, the Shanghai Securities News reported Jan 16.

 

"We're preparing for rapeseed oil futures, but have not submitted an application to the CSRC," Zhang said.

 

China has approved preparation work for a new exchange for trading financial derivatives, as reported Jan 16.