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On November 6th 2020, China Financial Futures Exchange (the “Exchange”) released the revised version of the Measures of China Financial Futures Exchange on the Management of Market Makers (the “Measure”). The revised Measures added a relevant provision that the Exchange may adopt a tiered approach to market maker management.
Market making is a mature and fundamental trading scheme, prevailing in global derivatives markets. It plays an important role in improving market liquidity, enhancing price efficiency and strengthening market stability. Since 2015, domestic stock exchanges and futures exchanges have successfully introduced market making schemes to 49 products, including SSE 50 ETF Option, Nickel Futures, PTA Futures, Iron Ore futures, etc. The Exchange also introduced the market making schemes to 10-Year, 5-Year and 2-Year China Government Bond (CGB) Futures in May 2019, and CSI 300 Index Options in December 2019, which improved market liquidity of the CGB Futures and Equity Index Options market, enhanced market operation, and promoted market stability and functioning.
In considering the development of the financial futures market and the growth of the market making business, further optimizations need to be implemented to market maker management on top of maintaining normal daily operations. Under this circumstance, in order to meet market demand and incent market makers, the Exchange plans to revise the relevant rules to adopt a tiered approach in market maker management. In the revised Measures, the Exchange will be able to classify market makers into tiers upon market development and management needs. The revised measures will further improve the management of market making and the quality of the business.
Next, in line with CSRC's requirements of "Four Awes" and "One Synergy", and the strategy of further deepening of the capital market reform, the Exchange will steadily implement the tiered approach of market maker management and optimize the Exchange’s market maker structure according to market operation and development. The Exchange will continuously improve market making schemes, maintain market stability and facilitate market efficiency of the financial futures market.
