Economic Observer Online
Feb 10, 2012
By Chen Huijing (陳慧晶)
Translated by Song Chunling
Original Article: [Chinese]

According to the notice issued by the China Financial Futures Exchange on Feb 9, simulated trading of government bond futures will start on Feb 13.

Mock trading on the new futures market will be based on 5-year government bonds with a coupon rate of 3 percent.

The daily price limit on mock trading will be set at 2 percent from the previous settlement price of the futures contracts.

Experts say that five-year bonds have been chosen on account of their wide circulation.

The China Securities Journal reported that around ten institutions, including, Guotai Junan Futures (國泰君安期貨), Orient Futures (東證期貨), Haitong Futures (海通期貨) and GF Futures (廣發期貨), will be the first to participate in mock trading.

Dang Jian (黨劍), president of Orient Securities, said that the trading of bonds and securities will promote interest rate liberalization. He also stated his hopes that other market entities aside from commercial banks and insurance companies can participate.

A director at China Financial Futures Exchange pointed out that bonds and securities are one of the more mature securities.

With the expansion of China's bond market and the promotion of interest rate liberalization, more bondholders are seeking to maintain value.

China launched a government bond futures in 1992 but banned the product in 1995 after a huge trading scandal.

T he China Financial Futures Exchange began to trade stock index futures in 2010, four years after mock trading of the futures were launched in 2006.

There were no details of when real bond futures trading would begin.