The Shanghai-based China Financial Futures Exchange (CFFEX),
where the mainland's first index futures product is to be traded,
has approved 52 member companies, a major step toward launching the
CSI300.
The futures companies were brought into the exchange system in
four batches from late October.
Of the 52, seven are all-round clearing members, 27 trading
clearing members and 18 are trading members.
A trading member can only serve as a broker for investors, while
a trading clearing member is allowed to conduct clearing business
for its own clients.
Crucial to the whole trading process, clearing facilitates the
matching of trades, ensures smooth deliveries and keeps track of
counter-party risks arising from margin trading.
Under the exchange's trading rules, all-round clearing members
can act not only for their own clients but also for other futures
companies.
In March, the China Securities Regulatory Commission (CSRC) set
the registered capital threshold at 50 million yuan for a futures
firm to operate a clearing business, higher than the 30 million
yuan required for commodities trading.
Only registered commodity futures companies with
well-established trading records and demonstrable expertise can
apply for CFFEX membership to trade financial futures.
At the top of the exchange's system are the special clearing
members, mostly commercial banks, which can conduct clearing
transactions for all other categories of members.
Industry experts and analysts say most prospective trading
members would prefer to use special clearing members, the
commercial banks, as their agents, rather than the all-around
clearing members. This is because futures companies acting as
trading members could expose client information to the all-clearing
members, who are also futures companies, and they could lose their
competitive edge in the market.
No special clearing members have been approved yet.
China Minsheng Bank has finished setting up its clearing
facilities to connect the bank's margin depository center, the
exchange, futures companies and margin monitoring centers.
Analysts said faster preparation by commercial banks could
expedite the introduction of index futures trading.
(China Daily December 19, 2007)
