China's top securities regulator said it would tighten oversight on commodity futures trading to clamp down on speculation, and vowed to open up commodity-derivatives market to offshore investors as it seeks to become a price maker on a global scale.
"Recently, domestic markets saw excessive trading volume and wild price swings in some commodity futures. We've guided exchanges to take a number of measures targeting speculative activities," Fang Xinghai, vice chairman of China Securities Regulatory Commission, told a derivatives market forum at the Shanghai Futures Exchange today.
A speculative frenzy in March and April sparked a surge in prices of China's steel, rebar, coking coal, and iron ore futures. That was followed by a rapid slide after the regulator intervened and introduced a slew of cooling-down measures such as tightening trading rules, raising transaction fees, and barring suspicious accounts from trading.
"The measures have achieved a notable effect, and exchanges should keep a close eye on commodity futures trading to crack down on illegal activities and maintain market order," Fang said.
China is planning to introduce more commodity derivatives such crude oil futures and open up the market to offshore investors as part of an effort to become a global pricing center of commodities, Fang said.
"A large number of international companies are engaged in spot transactions of commodities in China and they have been calling for admission to futures trading in order to hedge risks," he said, "China will gradually open up futures markets, starting from internationally-traded products such as crude oil, iron ore, and rubber."
The regulator said it is also considering allowing banks and other financial institutions to trade in more commodity futures to meet the rising demand for hedging and asset allocations. Currently, banks are only allowed to trade gold and silver futures.
