Options trading pilot gets closer

The China Securities Regulatory Commission (CSRC) said Friday that it's planning to launch a pilot program for options trading on individual stocks in the Chinese mainland, indicating the regulator is trying to provide more hedging tools for institutional investors in order to increase stock market trading volumes.

The CSRC said at Friday's press conference that it is still researching risk control mechanisms for the program, and gave no timetable for its launch.

"The launch of options trading on individual stocks means more equity derivatives can be used as hedging tools in the mainland financial market," Li Daxiao, research director at Shenzhen-based Yingda Securities Co, told the Global Times.

"The new equity derivatives could encourage investors to invest in strong stocks such as blue chips rather than to speculate on junk stocks," Li said.

During recent years, China has been looking to diversify its capital market by allowing more kinds of financial derivatives to be traded.

For instance, China started stock index futures trading in 2010, and launched a pilot refinancing program in August last year to boost margin trading.

Early in March this year, Gui Minjie, chairman of the Shanghai Stock Exchange (SSE), said during a press conference that the exchange was planning to launch options trading for individual stocks this year, although he gave no further details regarding the timetable.

The SSE started simulated options trading in June this year, to trade shares of Industrial and Commercial Bank of China and units of Huaxia Capital Management's China 50 exchange-traded fund.

"Individual investors may need a huge amount of money in their premium accounts to conduct options deals, which should be higher than the margin required for trading equity index futures," Li explained.

Currently, investors need to have at least 500,000 yuan ($81,500) in their margin accounts to trade stock index futures.

Moreover, individual investors without a professional financial background should be cautious of entering into the market due to the high risk involved, Li said.

He added that investors will be required to pass a test before they are given permission to trade.