People’s Republic of China: CSRC Intends to Expand Business Scope for Futures Companies

By Chloe Duan and Grace Ye

On 24 March 2023, China Securities Regulatory Commission (CSRC) released the draft amended Regulatory Measures for Futures Companies (Amended Regulatory Measures) for consultation, aiming to, amongst others, expand the scope of business activities that future companies are allowed to conduct directly.

Under the current regime, which is outlined by the Regulatory Measures for Futures Companies (Regulatory Measures 2019), the typical business scope of a futures company is commodity futures brokerage. Businesses with higher risks—such as financial futures brokerage, offshore futures brokerage, and futures consultancy—are subject to CSRC’s separate and special approval and practically required to be carried via special purpose subsidiaries (Risk Management Subsidiaries) so as to protect futures companies from such high-risks businesses.

With the coming into force of the Futures and Derivatives Law of China (Futures and Derivatives Law) on 1 August 2022, which expressly permits direct involvement of futures companies in futures brokerage (no longer distinguishes commodity futures and financial futures), futures consultancy and market making activities, the Regulatory Measures 2019 is expected to be amended and updated so to align with the Futures and Derivatives Law. The current risk-segregation approach under the Regulatory Measures 2019 requires futures companies to allocate separate funding and personnel to fund and operate Risk Management Subsidiaries; it is believed that with the change brought by the Amended Regulatory Measures, futures companies will be able to deploy capital, human, and marketing resources in a more efficient way as such segregation is no longer required.  

The Amended Regulatory Measures, however, fails to address topics relating to offshore futures brokerage and foreign futures exchanges operating onshore. CSRC noted in an explanatory notice that such topics require further research and analysis.

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