Today, the SSE 50 ETF option is officially launched and traded on the Shanghai Stock Exchange (SSE), heralding the development of China’s option market. As the first option product in China’s capital market, it fills the gap of the product of its kind on the stock exchanges in China, marking the new breakthrough in innovation and development as well as the new progress in the construction of the multi-tier capital market made by the SSE, and injecting new vitality in building Shanghai into an international financial center.
The pilot for trading of stock ETF option on stock exchanges, an important measure to implement the requirements in the “Some Opinions of the State Council on Further Propelling Sound Growth of the Capital Market”, is conducive to enriching the trading strategies and means of risk management for investors, improving the price discovery mechanism of the capital market, increasing the liquidity of underlying stocks, and propelling the innovative development of the securities and futures dealers. As the first ETF product, the SSE 50 ETF, featuring large size, high liquidity and strong resistance to manipulations, is an ideal product ready for option trading. With the strict risk control arrangement, we believe that the pilot will be risk controllable for steady promotion.
Stock ETF option is a mature derivative instrument on the international capital market, but it is a completely new product in China. With extremely complex combinations in application, it is like a double-edged sword which could serve as an instrument for risk management and also lead to new risks. It is necessary for all market participants to make concerted efforts in drawing on advantages and avoiding disadvantages of this new instrument to make effective use of it and give full play to its unique role.
First, we should make effective efforts in education and service for the investors. When providing the business of stock ETF option, securities and futures companies should brief investors on its features, rules and risks clearly, completely and adequately, and strictly implement the requirements for investor suitability management. All investors should be earnest in mastering and understanding the knowledge of the stock ETF option, comply with relevant regulations, prudently assess the risks, and rationally participate in the trading.
Second, we should make effective efforts in management and control of risks. Without strict and adequate risk management, the derivatives market will not achieve healthy development. As the first standard derivatives product listed on a stock exchange, the stock ETF option is also new to the market organizers and participants who have been long engaged in spot securities trading, and the market making for option is also a new business. The SSE and China Securities Depository and Clearing Co., Ltd. (CSDC) should transform their spot-oriented concept, accurately master the features of derivatives trading, be fully aware of the risks, set up and improve the risk control measures, tighten up risk management, effectively prevent the systematic risks, and maintain the smooth operation of the market.
Third, we should make effective efforts in market regulation. As the first derivatives product across the futures and spot markets settled with the delivery of the stock ETF at the settlement day, the stock ETF option has posed new challenges for our traditional regulation mode featuring separate monitoring and supervision over the futures and spot markets. The SSE, CSDC, China Securities Investor Protection Fund Corporation Limited, China Futures Margin Monitoring Center Co., Ltd., industry associations and other institutions should effectively take their responsibilities of frontline regulation, strengthen information sharing and joint regulation, detect the clues of violations and timely take the self-regulatory measures. The China Securities Regulatory Commission (CSRC) will intensify the regulation over all processes of the operation of the stock ETF option market, severely crack down on market manipulation, insider trading and other violations, and effectively protect the legitimate rights and interests of investors. Meanwhile, we will timely sum up experience to improve the systems and rules, so as to promote the healthy development of the market.
Finally, I sincerely wish the SSE 50 ETF option a smooth start and sound development!
Thank you all!
Source: Shanghai Stock Exchange