Date：July 24, 2014
Source: Futures Daily

　　The "new 9 opinions" (i.e., The State Council's Several Opinions on Further Promoting the Healthy Development of the Capital Market) is an important guidance on how we could make new achievements in the development of the futures market. Back to ten years ago when the nation's cabinet published the "old 9 opinions", the then gloomy market found its blueprint.
　　5 Major Implications
　　The just-concluded innovation conference of securities company has proposed including the development of OTC derivatives into the development of private placement market. Other clear signs have pointed to major breakthroughs in the financial derivatives market with the forthcoming introduction of ETF options by the Shanghai Stock Exchange (SSE) and the “9 new opinions” focusing on futures business institutions. The futures industry is set to receive the long-awaited rich institutional bonus at the junction of spring and summer of 2014.
　　The following 5 articles have noticeable impact on the futures companies:
　　1. Relax on market entry control for futures company. Work should be done on the establishing of management systems for securities and futures business licenses and researches on the license cross-holding among securities companies, fund management companies, futures companies and securities investment counseling companies; support other qualified financial institutions in applying for securities and futures business license; support securities and futures institutions in their joint efforts with other financial institutions in exploring integrated operation via cross-ownership and share participation with risks controllable
　　2. Promote the innovative development of futures company. To enhance the concentration of institutions within the futures industry while support the organizations in broadening their fund-raising channels and business scope; optimize the deposit model for client's settlement funds with risks controllable; support the futures institutions' efforts in creating new products in business such as risk management, capital intermediation, investment and financing; standardize the development of counter business of futures institutions. Innovation must not be promoted at the cost of loosening supervision and overlooking risks.
　　3. Expand the number of futures institutions investors. To actively support the national social security fund's engagement in capital market investment, and support social insurance funds, enterprise annuity, commercial insurance funds, overseas long-term funds and other institution investors’ funds in gradually broadening their investment scope and scale in the capital market.
　　4. Provide guidance for the development of Internet-based businesses of futures companies. Support the futures industry in developing new products, businesses and transaction methods based on the information technology of Internet. Support qualified Internet companies' participation in capital market and broaden the cover of capital market services. It's accentuated that the supervision regulations on Internet-based futures business should be established and optimized while filling in loopholes of regulation, strengthening risk monitoring and promoting the standardized and healthy development of the Internet-based capital market business as a whole.
　　5. Futures companies should strengthen their protections of small and medium investors, enhance their efforts in sharing information and coordinating actions with the futures supervision authority. To crack down on every kind of illegal securities and futures activities and do a good job in guarding against and tackling financial risks.
　　To perfect the legal system of futures with focus on pushing the enactment of the Futures Act. To combine the forces of law, administration and industry self-discipline to perfect the management system of capital market information distribution. To seriously handle the cases of those institutions and individuals who commit rumor-making, rumor-mongering and hyping of untrue information and result in misleading investors and damaging social stability.
　　Rich Institutional Bonus
　　Financial polices have deep-reaching effects and receive immense attention. China's financial polices, compared with those of western countries, are special in its dual role in supporting financial reform and substantially supporting the development of a certain industry. The futures market will receive rich institutional bonuses in the future with the blueprint of the '9 new opinions'.
　　To Speed up the Promulgation of the Futures Act
　　According to the Legislation Plan of the Standing Committee of the 12th National People's Congress, the Futures Act has been listed as a second-type legislation project and its draft will be carried out by the Financial and Economic Committee of the National People's Congress. Consensus has been reached on the necessity of the enactment of the Futures Act, which is boosted by the publishing of the “9 new opinions”. The Futures Act is expected to make basic institutional arrangements for the domestic futures and derivatives market on a relatively high legislation level, to provide top design for the reform and development strategy and to provide fundamental guarantee for the further development of such markets and futures companies.
　　Products and Sectors of Futures Market will be Greatly Expanded in 3-5 Years.
　　The financial futures market will be preliminarily perfected with the introduction of products such as stock index, bond, foreign exchange, credit, weather, and carbon emission futures. Meanwhile, various futures products will be released and the domestic futures and derivatives market will be further developed, providing futures companies more instruments to serve domestic medium-and-large-sized financial institutions and access to domestic risk management via financial futures instruments. Commodity futures like crude oil, natural gas and electricity will be available. The enterprises consisting of the domestic energy industry chain will be enabled to practice risk hedging inside the country. The release of commodity index futures of separate futures companies will be greatly boosted. A lot of achievements are expected in the market value management of listed companies and the hedging of industry chain. The continuous release of new futures products and the ongoing enrichment of the futures and options product system will inject new blood into China's futures market in the future.
　　Mixed Operation for Futures Companies in the Next 5 Years
　　The state measures of relaxing market entry, allowing cross-license-holding, inviting special institutions as investors and utilizing the 　　Internet-based finance are followed by favorable policies. The business scope of futures companies will be further expanded. Those powerful ones will establish mixed operation once they've been granted other financial licenses. The futures companies will be in a preemptive position in the business development of market-maker, interest arbitrage and institutional investors’ service providers. The futures companies will gradually shake off the situation of narrow margin, singularity of revenue and income resource, weak core competitiveness, brain drain and low influence.
　　Futures companies have attached elevated importance to the education and protection of futures investors.
The healthy development of futures companies is indispensable of the maturity of investors. With this in mind, they have made the education and protection of investors as a long-term scheme and lavished human, financial and material resources into the cause.
　　The role of a futures company will be transformed itself from a financial enterprise offering single brokerage and consulting services to a comprehensive financial service institution which offers risk management, wealth management and financial derivatives.
　　The relax of the limitations on enterprise investor's participation in the market and the encouragement for futures companies to develop products around risk-management signal that China's risk management service market will enjoy great potential, where futures companies could offer tailored products and services to clients with the release of subsidiary corporation platform for risk management as well as options. Futures companies could help real-industry clients identify the reason behind the fluctuation of prices and deliver more customized OTC risk management products for them based on their expertise in derivatives market. The futures companies will strengthen the service for private placement institutions and strive to develop business of wealth management. They will also issue financial products together with major industry players, realize cross-border futures interest arbitrage of private placement institutions via QDIIs and support the growth of small-and-medium-sized investors through program trading. The futures companies will actively explore new services and marketing methods in accordance with regulation with the help of Internet-based financing and develop themselves into comprehensive financial service providers.
　　Futures companies are expected to be internationalized.
　　The opening-up level of the futures and options industry should be enhanced, according to the “9 new opinions'. Those first entering the global market will gain a phased bonus and enjoy faster development. In fact, China's futures companies have been actively preparing for internationalization. Several of them which have branches at Hong Kong have already made constructive attempts through the platform. In 2013, the GF Futures (Hong Kong) purchased 100% shares of the NCM Futures of UK and acquired clearing membership of the LME. It also established branches in the Shanghai Pilot Free Trade Zone to develop the market in Southeast Asia, Japan, UK, United States and Brazil. Nanhua Futures (Hong Kong) are accelerating the registration of futures commission merchant (FCM) in the United States to perfect its internationalization while it has already been successful in Hong Kong market. Yongan Futures established its U.S. office in 2013 and is planning to do the same in Singapore. It's also mulling over overseas merger and acquisition. The futures companies should grasp the opportunities provided by the “9 new opinions” to "go out" and pay close attention to chances of share participation, holding, merger and acquisition. They need to explore the strategies and profit model of internationalization.