CSRC starts work on first contract for crude oil futures

China's securities watchdog said on Friday it planned to complete preparatory work for the country's first crude oil futures contract over the next three months.

Zhang Xiaojun, a spokesman for the China Securities Regulatory Commission, said it would look into crude oil industry supporting policies and examine and approve regulations and trading rules for the Shanghai International Energy Exchange Corp.

Separately, the commission also formally released new regulatory rules on overseas traders and brokerage companies participating in particular types of futures trading, which will take effect from August 1.

The rules include expanding the number of participants in the Chinese futures market, offering overseas traders and brokerage firms different trading patterns, standardizing business practices on futures trading, and specifying responsibilities in the ongoing crackdown on illegal activities.

The CSRC said it had signed memorandums of understanding with regulatory counterparts in many countries, and cross-border arrangements would be included under the framework.

Overseas traders can participate in futures trading in China through domestic futures companies and qualified traders can enter the market directly.

Officials said the CSRC will also consider allowing overseas traders and brokerage companies to participate in other particular types of futures trading in the future.

In late 2013, the CSRC approved UBS Securities Co Ltd's application to acquire Shanghai Pumin Futures Brokerage Co, which made it the fourth Chinese futures company to be set up using foreign capital.

The same year also saw the first takeover deal by a Chinese buyer, GF Futures Co Ltd, which acquired the United Kingdom-based NCM Futures Co.

Xiao Cheng, vice-chairman of GF Futures, said then that buying foreign futures firms will bring advanced trading strategies and services to the Chinese market and lead to higher profits.

Xiao said the CSRC's rules were good, but acquiring foreign futures companies had become more difficult because of rising costs, as economic recovery continued in the United States and Europe.

The commission has continued to encourage overseas expansion by Chinese futures companies, as it said this not only helps diversify their own businesses, but also improves their risk management capabilities.