China includes foreign banks on list to trade govt bond futures (updated)

Oriental Watch Holdings

11/07/2013 09:02

(Adds details, background) * Banking regulator has selected 24 banks for trading * They may be queued two groups to enter new market * Include top Chinese lenders and 3 foreign banks * More banks to be approved if market proves success By Hongmei Zhao HONG KONG, July 11 (Reuters) - China's banking regulator is considering including three foreign banks among a list of two dozen domesgtic banks that could be permitted to trade in a new government bond futures pilot programme expected to be launched in September, three sources with direct knowledge of the matter said on Thursday. The chosen three, HSBC Holdings  0005.HK   HSBA.L , Citibank NA  N.A  and Standard Chartered  STAN.L , have all been active in China's markets since the 1990s. As part of the country's wider financial reforms, China has said it will relaunch trading in government bond futures in the Shanghai-based China Financial Futures Exchange after an 18-year ban, starting with a five-year contract.  ID:nL4N0FF04S  The Chinese commercial banks on the regulators' list include the big four state-owned banks; Industrial and Commercial Bank of China  601389.SS  0398.HK , China Construction Bank 601939.SS  0939.HK , Agricultural Bank of China  601288.SS  1288.HK  and Bank of China  601988.SS  3988.HK . The regulator is still deciding how to phase in trading.  It is likely a dozen banks will be permitted to trade when the market opens, and the remaining dozen would make their entry later. Alternatively, all 24 could be involved from the start, according to sources. More banks will be allowed to participate if initial trading proves a success and the market operates smoothly, the sources.  "Commercial banks will surely play a main role at the initial stage of the government bond futures trading," one of the sources told Reuters. "Currently, there are two plans, with the one that banks be queued into two groups more likely to be selected in the name of risk mitigation." The China Banking Regulatory Commission is likely to announce the choice before the end of July, the sources said. The Commission did not immediately Reuters' request for comment. The fledgling futures exchange, established in 2006, currently trades only stock index futures. Aside from adding government bond futures, it is also said to be preparing to begin trading in stock options. Authorities scrapped government bond futures trading in 1995 after a major trading scandal on the Shanghai Stock Exchange caused heavy losses to a state-controlled securities brokerage. The reintroduction of a government bond futures market has been expected since the securities regulator began simulated futures trading in February 2012. ($1 = 6.1342 Yuan)   (Writing by Lu Jianxin; Editing by Pete Sweeney and Simon Cameron-Moore) ((pete.sweeney@thomsonreuters.com)(+86 21 6104 1777 / +86 158 0188 9934)(Reuters Messaging: pete.sweeney.thomsonreuters.com@reuters.net)) Keywords: CHINA BONDFUTURES/