Regulator relaxes rules on stock index futures

China's securities regulator has relaxed the trading rules for stock index futures, signaling a gradual exit by the regulator from the harsh restrictions imposed during the market rout in 2015, analysts said on Friday.

The measures include lowering trading fees and raising the maximum daily trading cap at 10 contracts to 20 per investor. The minimum margin requirement for trading on the CSI 300 and SSE 50 index futures was also reduced from 40 percent to 20 percent of the contract value, according to a statement by the China Financial Futures Exchange on Thursday.

The relaxation reflected the regulator's desire to gradually restore the market function as a risk-hedging tool which was almost killed off in 2015 by a series of restrictive measures taken by the regulator to stem a market rout, analysts said.

Ma Wensheng, chairman of the Xinhu Futures Co Ltd, said: "A healthy and stable development of the stock market needs an effective futures market as a risk-hedging tool. The move by the regulator was in line with market expectations and meets investors' demand for this much-needed tool."

The trading of stock index futures was blamed for the market crash in the summer of 2015. Restrictive measures later imposed by the regulator almost dried up liquidity in the market and resulted in a dramatic drop in trading volumes.

While the initial effect on market trading will be limited as the relaxation was more of a symbolic gesture, the move was seen by analysts and investors as a timely and positive step to gradually improve the liquidity of a thinly-traded market.

Li Xinran, an individual investor in the stock index futures in Beijing, said: "I do not expect a big and substantial change in the current trading at the moment. But it is an encouraging message from the regulator to gradually normalize the market and improve liquidity."

Analysts at Sinolink Securities Co Ltd said in a report that the initial effect of the trading relaxation of stock index futures would likely be neutral on the A-share market.

"The future movement of the A-share market will be decided by a basket of factors. The overall market condition has not changed and we maintain our target for the benchmark index to reach 3,300 point," they said.

The benchmark Shanghai Composite Index dropped 0.85 percent to 3,202.08 point on Friday.