A brief 500 word announcement published online with neither fanfare nor translation could turn out to be a landmark in the development of China’s derivatives markets.
The document, posted by the China Securities Regulatory Commission, said the government had last Friday approved “in principle” the introduction of equity index derivatives as well as trading on margin and short selling.
The announcement said the State Council, China’s nominal cabinet, was declaring a programme of “testing and gradual expansion” under the auspices of the CSRC, following the success of years of “investor education”.
China had a thriving financial derivatives market in the early 1990s but the authorities closed it down in 1996 after a rash of scandals.
Since then, such trading has been banned. In 2006 the China Financial Futures Exchange was set up in Shanghai to restart the market on a...