CSRC Updates Rules for Managing Margin Deposits for Futures

Source: Regulation Asia Editors, Regulation Asia 2020-07-22

The revisions strengthen the obligations of depository banks and futures companies in managing margin deposits for futures trading, and clarify that the same rules apply for overseas participants.

The CSRC (China Securities Regulatory Commission) has issued a consultation on new measures to strengthen the margin depository system for futures companies.

Under the revisions, the CSRC will remove requirements for futures companies to provide supporting documents for transfers to the depository bank, while increasing obligations for such transfers (and account opening/closure) to be reported to the China Futures Market Monitoring Center.

The revisions also clarify that futures companies may hold multiple margin accounts with depository banks in accordance with their business needs, but a lead depository bank must be designated.

The revisions also strengthen the obligations of depository banks and futures companies in managing client margin funds.

Clients engaged in futures trading shall hold an account with a depository bank in their own name, rules say. For withdrawals, clients funds should be transferred to the futures company’s own depository account before being transferred to an account held in the client’s own name.

Futures companies may not misappropriate client margin deposits to meet margins of other clients. When client margins are insufficient, futures companies must make up the margin with their own funds.

Any irregular activity should be reported to the monitoring centre, and, if account freezing is required, the depository bank shall guarantee the frozen funds are protected, segregated and easily identified as separate fro other funds.

The revisions also clarify that the same provisions also apply to overseas traders and brokerage firms engaging in domestic futures trading. Currently, futures products such as crude oil, iron ore, PTA and No 20 rubber are open to foreign investors.

China Securities Regulatory Commission

CSRC Updates Rules for Managing Margin Deposits for Futures

Subscribe to Our Newsletter!

Subscribe to Our Newsletter!