(Recasts, adds detail on rules)
SHANGHAI, JULY 18 (Reuters) - China on Wednesday released draft rules for the trading of two-year government bond futures, a long-awaited step toward liberalising rates at the short-end of the yield curve.
The rules, published to seek public feedback, were released Wednesday evening on the website of the China Financial Futures Exchange (CFFEX).
The new futures will be based on Chinese government bonds with original maturities no longer than 5 years, and with residual maturities of between 1.5 and 2.25 years, the draft rules said.
The futures will have face value of 2 million yuan ($297,740) each, with a nominal interest rate of 3 percent.
As with existing treasury futures, trading in the contracts, which will be physically delivered on maturity, will be subject to margin requirements of at least 2 percent, and a range of settlement prices of 2 percent up or down.
At present, only 5- and 10-year government bond futures are traded on CFFEX.
The public has until July 24 to submit suggested amendments to the rules, CFFEX said in a statement. ($1 = 6.7173 Chinese yuan) (Reporting by Andrew Galbraith; Editing by Richard Borsuk)