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CSRC Announces Permissible Derivative Contracts for QFIs

2021.10.18 XIE, Qing (Natasha)、 ZHANG, Chi、LUO, Danchen

On October 15, 2021, after consulting with the People’s Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE), the China Securities Regulatory Commission (CSRC) released the Announcement on Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investors Participating in Financial Derivative Trading ([2021]No.24) (the “Announcement”), for the first time allowing qualified foreign investors (QFIs) to trade commodity futures contracts, commodity options, and stock index options, which will become effective from November 1, 2021, just one year after the official implementation of the amended QFI rules (the “Rules on QFI Reform”). According to the Rules on QFI Reform, the specific types and trading methods of financial futures, commodity futures and options that QFIs are permitted to trade shall be first proposed by the relevant exchanges to the CSRC for approval, and then the CSRC will announce the final decision after consulting with the PBOC and the SAFE. 

The commodity futures contracts and commodity options hereof refer to those contracts listed and traded on the Shanghai Futures Exchange, Dalian Commodity Exchange, Zhengzhou Commodity Exchange, Shanghai International Energy Exchange, Guangzhou Futures Exchange and any other exchanges that the CSRC may approve in the future. We expect that from November 1, 2021, QFIs would be allowed to trade all kinds of commodity futures and commodity options contracts, though this is still pending further confirmation from the CSRC and the relevant exchanges. Additionally, according to the Announcement, QFIs are permitted to trade stock index options for hedging purpose only, subject to the same restriction as that for stock index futures, reflecting regulatory authorities’ consistent prudential regulatory attitude toward foreign participation of trading of stock-related financial derivatives.

Since the Rules on QFI Reform were implemented, the CSRC has been processing approvals at an unprecedent speed. In just 11 months, the CSRC has granted QFI licenses to 140 foreign institutions in total, more than the total number of institutions approved from October 2015 to October 2020, after the Stock Connect, a regime that competes with QFI regime, was introduced in November 2014. 

After allowing QFIs to trade commodity futures, commodity options and index options, we hope that regulatory authorities would allow QFIs to trade more types of products without limitations such as treasury bond futures, ETF options, bond repos and others in due course, as well as trade financial derivatives for non-hedging purpose, so as to further extend the opening-up of Chinese securities and futures markets.

We will continue to pay close attention and will share the latest developments with our clients.

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