July 23, 2018 / 6:41 AM / 8 months ago

China regulator says stock index futures "back to normal" soon -sources

SHANGHAI/BEIJING, July 23 (Reuters) - A top Chinese securities regulator said on Monday that trading in stock index futures will soon be “back to normal,” two sources said, suggesting the government is about to lift the draconian restrictions on such derivatives it imposed during China’s 2015 market crash.

Fang Xinghai, vice chairman of the China Securities Regulatory Commission (CSRC), made the remarks during an internal training meeting with futures brokerage executives, the sources, who have direct knowledge of the matter, told Reuters.

The sources said Fang did not define “normal status”, but the easing gesture, made after China’s stock market has fallen about 14 percent this year amid a nascent trade war with the United States, points to regulators softening their approach.

The CSRC did not immediately respond to Reuters emailed request for comment.

China imposed draconian restrictions on stock index trading during the stock market crash in the summer of 2015, sharply raising margin requirements and tightening position limits.

The CSRC also blamed foreign and domestic short-sellers for worsening a crisis that sent shockwaves across global financial markets.

But there were fewer signs of direct government intervention during last month’s panic selling, driven by the Trump administration’s imposition of tariffs on some Chinese exports and threats to impose more.

China granted global hedge fund managers Bridgewater Associates LP and Winton Group licences to launch products in China, a move seen as underscoring Beijing’s commitment to financial deregulation.

Although China has been gradually loosening its restrictions on index futures trading, investors have complained current rules are still too rigid.

The inclusion of Chinese stocks into MSCI’s emerging market benchmark has increased the urgency of further deregulating the derivative market, because foreign investors have long complained over the lack of hedging tools in China. (Reporting by David Lin, Zhang Xiaochong and John Ruwitch; Writing by Samuel Shen; Editing by Eric Meijer)

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