Today, the China Securities Regulatory Commission (CSRC) solicits public opinions on the revised Measures for Administration of Stock Options Trading. The revision is an important step to implement the relevant system of the Futures and Derivatives Law issued in August 2022. It further clarifies the registration scheme for stock option contracts, strengthens the protection of stock option traders and improves the arrangements related to risk control in the stock options market. The Shanghai Stock Exchange (SSE) has simultaneously started the revision of supporting rules related to stock options trading, striving to build a concise, clear and user-friendly rule system.
Stock options are fundamental risk management tools for the stock market. Since the listing of the first exchange-traded stock options product, the listed products and market size of the SSE's stock options have been steadily growing, product functions have been gradually brought into play, and the market ecology has been increasingly improved. Following the listing of CSI 500 ETF options in September 2022, the coverage of underlying constituent stocks of SSE's options witnessed a substantial increase in the market value. Besides, product series of risk management covering mega-cap, large-cap and mid-cap market values have been formed to better meet the diversified risk management demands of the market.
The experiences of the SSE's options market over the past 8 years have shown that stock options have the economic functions of risk management and boosting spot market activity, and can effectively encourage the development of the spot market. On the one hand, with the unique risk transfer and insurance functions, options enhanced investors' confidence in long-term stock holdings, which in turn serves to smooth out volatility and stabilize the spot market. On the other hand, options helped to improve the pricing efficiency and liquidity of underlying spots, injecting new vitality into the spot market.
Going forward, under the guidance of the CSRC, SSE will actively push forward the revision of supporting business rules for stock options, speed up the implementation of relevant institutional mechanisms, continuously optimize market construction and provide premium services and supervision for the market to boost the high-quality development of the stock options market.
