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Financial futures founder applauds China's bond futures launch

English.news.cn   2013-07-07 19:08:55            

HANGZHOU, July 7 (Xinhua) -- China's upcoming launch of treasury bond futures will provide a tool for managing interest rate risks, and it is a very good decision, the globally-recognized founder of financial futures said Sunday.

"In the long run, it will help the Chinese financial market become more liquid and more efficient," Leo Melamed, chairman emeritus of the Chicago Mercantile Exchange (CME), told Xinhua on the sidelines of the 5th China International Assets Management Conference, which closed here on Sunday.

The China Securities Regulatory Commission (CSRC) announced Friday that China will resume the issuance of treasury bond futures after 18 years of suspension. The trading is expected to start in about two months.

The bond futures mark the second product in China's financial futures portfolio, following index futures. The move to resume treasury bonds came amid China's deepening of market-oriented interest rate reforms, which have generated strong demand for hedging interest rate risks.

Melamed applauded the bond futures and said China's economic agenda should continue to evolve.

"China's corporations and its consumers have reached a stage where global risk management tools are essential as they seek higher growth on the world stage," said Melamed.

Therefore, it is imperative that China continue to develop financial derivatives and create greater liquidity in the underlying cash markets, he said.

Melamed said China's central bank is correct to keep credit expansion at an appropriate scale.

He said more risk management tools, such as futures and options, will integrate with the cash market to allow every segment of the marketplace to function together more efficiently.

Melamed also said Chinese futures exchanges have been liquid and well managed, but they are almost completely domestic, isolated from world participation and international competition.

He urged China to allow the participation of foreign firms and traders to strengthen the exchanges and create a more open and efficient capital market.

Addressing concerns on the development of asset securitization after the United States' subprime crisis, Melamed said it is a question of how much.

"In the United States, people went too far, and it is a case of having too much. In China, it is too little, and it is the other way around," he said.

As to risks people should watch in derivatives development, Melamed said real education is important, as derivatives represent sophisticated financial instruments that require expertise.

The 5th China International Assets Management Conference opened in Hangzhou, capital of east China's Zhejiang Province, on Saturday, drawing more than 600 experts and business delegates from the finance circle.

Editor: Chen Zhi
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