January 8, 2010
By Bloomberg News Jan. 8 (Bloomberg) — China approved stock index futures, giving investors in a market where the benchmark surged 80 percent last year a tool for profiting from declines. The government also approved margin trading and short selling, the China Securities Regulatory Commission said in a statement on its Web site today. It may take three months to complete preparations for index futures, the regulator said. Index futures, agreements to buy or sell an index at a preset value on an agreed date, may help ease fluctuations after the benchmark stock index almost tripled in 2007, then slumped 65 percent in 2008 before rebounding last year. Until now, investors in China could only profit from gains in equities. “This is a milestone in the development of China’s capital markets,” said Wang Yihuan at Beijing-based China Asset Management Co., which oversees more than $37 billion as the nation’s largest fund manager. “Investors finally have the tools to hedge or speculate and that will help all types of market participants to become more sophisticated.” Index futures are part of China’s push to make more investment options available in a nation with 25.3 trillion yuan($3.7 trillion) in household savings . The limited scope of securities to trade has contributed to boom-and-bust cycles in China’s stock and property markets. The first stock index contracts, based on China’s CSI 300 Index , may begin trading after the Communist party’s annual congress in March, an official with knowledge of the matter said earlier. The CSI 300 Index, tracks the 300 biggest stocks traded in Shanghai and Shenzhen, rose 0.3 percent today. The Shanghai Composite Index rose 0.1 percent. ‘Positive’ for Market “The launch of index futures is positive for the market,” said Zhang Xiuqi , a Shanghai-based strategist at China International Fund Management Co., which oversees about $10.2 billion. Zhang said stocks with large market capitalizations will be boosted because they’re heavily weighted in the index. China Securities Regulatory Commission Chairman Shang Fulin said in 2007 that the infrastructure needed for index futures, including regulations, are in place. Investors will be required to put up 10 percent of a contract’s value to buy, sell or short CSI 300-based futures as collateral, according to rules published on China Financial Futures Exchange’s Web site in 2007. The bourse has been conducting mock trading in the securities since October 2006. The value of the futures contracts will be points of the CSI 300 multiplied by 300 yuan, according to the trading rules the exchange set. — Zhao Yidi , Zhang Shidong , Luo Jun , John Liu. Editor: Philip Lagerkranser To contact Bloomberg News staff on this story: Yidi Zhao in Beijing at +86-10-6649-7575 or yzhao7@bloomberg.net Zhang Shidong in Shanghai at +86-21-6104-7014 or Szhong5@bloomberg.net
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November 6, 2009
Several major banks are fending off legislation meant to regulate the lucrative derivatives market by hiring a high-powered financial lobbyist. The Hill reports that Edward Rosen, a partner at the Cleary Gottlieb firm, has played a key role in derivatives legislation as Congress hones in on regulating the multi-billion-dollar market. Cleary Gottlieb reported close to $1 million this year lobbying for work on the derivatives market, and according to third-quarter lobbying disclosure reports, Rosen has worked in recent months for financial behemoths like HSBC Securities, Wells Fargo, Deustche Bank, Citigroup and Bank of America Securities. A little more on Rosen from Cleary Gottlieb’s Web site: Mr. Rosen has served as counsel to the Securities Industry and Financial Markets Association, the Securities Industry Association, the Futures Industry Association, the International Swaps and Derivatives Association and The Bond Market Association. From The Hill : “This guy is considered the bee’s knees of knowing the inside-out of derivatives,” said a financial-services lobbyist. Rosen wrote a two-volume book on derivatives legislation and has spent years working on derivatives law and lobbying. A spokeswoman for Cleary Gottlieb declined to comment. The House could vote on derivatives legislation, which would give new powers to the Securities and Exchange Commission to regulate the market, as soon as the first week of December. The Huffington Post reported last month that trading in the unregulated $600 trillion market was partially to blame for spurring last year’s financial meltdown. More than 1,100 banks now trade in derivatives and four banks control the market: JPMorgan Chase, Goldman Sachs, Bank of America and Citibank, according to bank regulator the Office of the Comptroller of the Currency. The Hill reports that commercial banks in the US reported a record $9.2 billion in revenue on derivatives in the first quarter of the year and $5.8 billion in the second quarter, which are the most recent figures available on the market.
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