Name: Circular on Issues Relating to Commercial Banks Conducting Domestic Gold Futures Trading (《中国银监会办公厅关于商业银行从事境内黄金期货交易有关问题的通知》, the “Circular”)
Issuing authority: China Banking Regulatory Commission (“CBRC”)
Effective date: 7 March 2008
Subject: Gold futures trading
Further to the Administrative Regulations of Futures Trading which lifted the prohibition against futures trading by financial institutions such as commercial banks, the CBRC has issued rules to allow commercial banks to engage in gold futures trading.
Highlights
- A bank must meet certain qualification requirements in order to trade gold futures, including, among others: (1) a minimum capital adequacy ratio of 8%; (2) possessing the qualification to trade derivatives and spot gold; and (3) a minimum of four employees with the relevant qualification recognised by the PRC futures industry, of which there must be at least two traders and two risk management personnel.
- A bank is required to be a member of the relevant futures exchange before it can trade gold futures (Gold futures are currently traded on the Shanghai Futures Exchange). To become a member, a letter of no-objection must be obtained from the CBRC. The circular prescribes that a separate futures brokerage qualification should be obtained where the bank is to conduct gold futures brokerage business. However, it is not clear how a bank may obtain such qualification.
- Where a bank is a designated gold futures clearing bank or a designated settlement vault, it is prohibited from using information obtained from its gold futures trading business.
- The Circular applies to all incorporated banking financial institutions in the PRC, including wholly foreign-owned banks.
