The China Securities Regulatory Commission released on December 16 the Guidelines for the Operation of Publicly Offered Securities Investment Funds No. 1-Guidelines for Commodity Futures Exchange-traded Funds (the "Guidelines") with immediate effect.
The Guidelines, consisting of 11 articles, set out provisions concerning the definition of commodity futures exchange-traded funds (ETF), scope of investment, risk control, responsibilities of the parties concerned and supervision requirements.
On the premise that the investment target and strategy are guaranteed, the Guidelines allow the commodity futures ETF to invest in other financial instruments other than money market instruments with assets other than by paying the deposit. In addition, to avoid the premium increase risk in the renewal of commodity futures contracts, the Guidelines make room for the delivery of standard warehouse receipts at the expiry of the contracts held by commodity futures ETF. However, to differentiate from physical commodities, the Guidelines provide that commodity futures ETF may not engage in the warehousing business for physical commodities.