会议综述

On February 21, the China Securities Regulatory Commission (CSRC), the Ministry of Finance, the People’s Bank of China (PBoC) and the China Banking and Insurance Regulatory Commission (CBIRC) jointly issued an announcement allowing qualified commercial banks and insurers to trade China’s Treasury bond futures at the China Financial Futures Exchange (CFFEX) in accordance with the principles of lawfulness, compliance, risk control and business sustainability. This initiative is of great importance in implementing China’s financial supply-side structural reforms, bolstering China’s capital market systems, and alleviating financial risks.

By participating in Treasury bond futures trading, commercial banks and insurers will be able to improve their risk management strategies, contribute to the sustainability of China’s financial market, improve the Treasury yield curve, and bolster the openness of the financial market. Allowing banks and insurers to trade Treasury bond futures marks a milestone in the development of China’s financial futures market.

1. Improving the Financial Market System

In advanced market economies, commercial banks and insurers have always been key players in trading a broad portfolio of derivatives such as futures, options, swaps and forward contracts. The integration of financial markets owes largely to the proactive and extensive participation of intermediaries like commercial banks and insurers. Such participation allows financial institutions to diversify their business portfolios and trading strategies. For the market system, the active role of financial intermediaries in financial markets at various levels of trading has blurred the boundaries between direct financing and indirect financing and between exchange-based trading and over-the-counter (OTC) trading, removing barriers to the flow of capital. The well-functioning futures market enables the integration of otherwise divided financial markets, allowing financial information to spread without barriers and financial resource allocation and macro-regulation to become more efficient.

In less than a decade, China’s burgeoning derivatives market has developed important market functions and attracted numerous professional and institutional investors. As the world experiences profound changes not seen in a century and the Chinese economy enters the new normal, the need to further improve China’s financial system is stronger than ever.

Allowing commercial banks and insurers to trade Treasury bond futures is important for increasing China’s bond market connectivity and financial market efficiency and sophistication. By participating in all financial factor markets, commercial banks and insurers will be able to trade a complete range of interest rate risk management instruments such as Treasury bond futures, interest rate swaps and forward bond contracts, allowing them to reduce their risk management cost and to operate their portfolios more efficiently. Furthermore, inter-market arbitrage by financial institutions will slash price differences for the same sorts of bonds and derivatives, raising bond and derivative price accuracy and the overall pricing efficiency and liquidity of financial assets. Lastly, the Treasury bond futures delivery system will break through the constraint of bond custody transfer between the interbank market and the exchange-based market, bolstering cross-market bond liquidity and inducing investors to trade spot Treasury bonds.

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