QFIIs trading on stock index futures
A new law opens up participation in the stock derivative market to qualified foreign institutional investors. However, as landmark as this rule may be, it remains fairly restrictive as regulators cautiously develop the market and seek to manage risks
Issue: June 2011
Keywords (click to search):
QFII
stock index futures
Fangda Partners
hedging
stock derivative
On May 4 2011, the China Securities Regulatory Commission (CSRC) issued the Guidelines for the Participation in Stock Index Futures Trading by Qualified Foreign Institutional Investors (合格境外机构投资者参与股指期货交易指引) (the Guidelines) which came into force on the same day. The Guidelines allow Qualified Foreign Institutional Investors (QFIIs) to trade onshore stock index futures (SIFs) on the China Financial Futures Exchange (CFFex), which marked a milestone of the opening of the stock derivative market to foreign institutional investors.
Implications
Before the enactment of the Guidelines, QFIIs were only permitted to trade shares, bonds and securities investment fund units publically tradable on the Shenzhen and Shanghai Stock Exchanges. The Guidelines, for the first time, provide QFIIs with a necessary hedging tool to manage risks in China’s volatile stock market.
Allowing QFIIs to participate in trading SIFs was one of the consensuses reached at the Sino-US Strategic Economic Dialogue held in May 2010. While...
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