Date：January 9, 2015
Source: China Securities Regulatory Commission

To carry out requirements in “Some Opinions of the State Council on Further Propelling Sound Growth of the Capital Market” such as “enhancing the leading position of securities exchange in market, develop main board, innovate trading mechanism and increase trading products” and “develop financial futures market and develop derivatives in a steady and orderly manner, gradually increase products of stock options”, China Securities Regulatory Commission (CSRC) now officially releases the “Management Measures for Stock Option Trading Pilot” (the “Pilot Management Measures”) and “Guidance for Securities and Futures Operation Agencies’ Participation in Stock Option Pilot Trading” (the “Guidance”), which will become effective since the date of release.
Stock option is a derivative that closely combines futures and spots. Currently, the trading of securities spots and futures are subject to the “Securities Law” and the “Management Rules of Futures Trading” (the “Rules”). CSRC authorizes according to the “Securities Law” and the “Rules” and releases the “Pilot Management Measures” and the “Guidance” in the form of department regulations and standards, providing legal evidences for trading of stock options. The “Pilot Management Measures” refers to the system of the “Rules” and will include 30 articles. They cover 5 aspects, such as the “trading venue and settlement organization of stock option”, “securities and futures companies’ qualifications for related business in stock option”, “investor protection”, “risk control measures for stock option” and “others”. There are 34 articles in the “Guidance”, including “related requirements of securities and futures companies’ participation in brokerage of stock options”, “requirements of securities and futures companies’ proprietary business, market-making and asset management businesses’ participation in stock option” and “regulatory requirements for securities and futures companies to enhance internal control and calculate risk control indicators”.
The “Pilot Management Measures” received 31 suggestions from market entities, industry associations and investors during the period of opinion collection from December 5, 2014 to January 5, 2015. Generally speaking, all parties believed that the “Pilot Management Measures” made clear prescriptions on the key points of stock option trading and the rights and obligations of participants, which provided smooth connections to their businesses. The opinions from the market mainly focused on 3 aspects: the first are opinions that are directly linked to articles. Apart from opinions on cross licensing and product details, the “Pilot Management Measures” adjusted some wordings in articles 2, 12 and 18; the second are opinions on the top design of the whole derivatives market, which is beyond the scope of the “Pilot Management Measures” and needs further improvement; the third are related opinions on details of product plan, which already has clear prescriptions in the “Guidance” and the business rules for their own businesses, and thus there is no need to repeat herein.
The “Guidance” received 26 suggestions from industry associations, securities and futures companies. Generally speaking, the “Guidance” was regarded as meeting the actual conditions of the operation of securities and futures companies and will be helpful to have a proper control of the risk of option business run by securities and futures companies and ensure a steady operation of business. The opinions mainly focused on 2 aspects: the first is to suggest allowing futures companies’ risk management subsidiaries to participate in option market-making business. Through study, we have stipulated in the “Guidance” that futures companies that meet certain conditions could have its subsidiaries participate in stock option business after being approved by CSRC; the second is to suggest detailing such items as intermediaries business mentioned in the “Guidance” in exchanges’ supporting self-regulatory rules or guidance, so as to clarify detailed requirements. This part of suggestions has been transferred to exchanges to have them clarified in related rules. Apart from opinions of these 2 aspects, the “Guidance” already made revisions according to the opinions on its wording; there were part of opinions that were related to the understanding of the “Guidance” and suggestions on the development of option business, and we will enhance training and study on the basis of industry research and development planning.
CSRC will approve and reply to related business rules of exchanges and settlement institutions in accordance with the “Pilot Management Measures” and the “Guidance”. It will urge exchanges, settlement institutions and other agencies to make full preparations for the pilot of stock options.