China's futures investors to have security fund

BEIJING: China will set up a fund worth up to $103.9 million to compensate futures investors in case their brokers fail to pay back their margin, the securities watchdog said. According to the provisional regulations on futures investors security fund management jointly issued by the China Securities Regulatory Commission (CSRC) and the Ministry of Finance, the fund worth up to 800 million yuan (USD 103.9 million) will start operation on August 1.

"The fund is established to maintain social stability and futures market security," a commission official said, adding the regulations do not apply to futures companies which went bankrupt or got shutdown before the issuance. Futures investors have to deposit a certain amount of margin at their brokers depending on how the market value of the contracts change, Xinhua news agency reported.

The regulations said in case of margin losses due to irregularities and mismanagement by brokers, the fund will fully compensate investors with less than 100,000 yuan (USD 12,987) in margin loss. For those with more than 100,000 yuan, individual investors will get 90 per cent of their margin back and institutional investors 80 per cent. Nevertheless, investors will not receive compensation for loss in daily futures trade and illegal trade.

"The fund is apt to protect small and medium investors," the official said, adding "we hope that investors will choose well-organised companies and know more about risks in futures trade." The futures exchanges located in Shanghai, Dalian and Zhengzhou will provide the fund. The fund will be managed by an institution designated by the CSRC and Finance Ministry.