The China Futures Association ("CFA") has recently issued the Guidelines for the Pilot Business of Risk Management Companies of Futures Companies (the "Guidelines") which have taken effect immediately from the date of issuance, and also set up a transition period for this document.
Revisions introduced by the Guidelines include: 1. providing further clarity on major business categories; 2. updating the criteria for record-filing of companies and of business and adding restrictive measures against companies that fail to meet the given conditions; 3. detailing the negative list concerning business development of risk management companies; 4. tightening requirements for management responsibilities of futures companies; and 5. improving requirements for information reporting. Further, the Guidelines sort out and classify again the categories of business in which risk management companies may engage, clearly stating that the pilot business they may carry out includes basis trading, warehouse receipt services, cooperation insurance, over-the-counter derivative business, market making business, and other business pertaining to risk management services, and that such risk management companies shall manage their different business by category. The Specifications (No.1 to No.7) on Application Materials Submitted by Risk Management Companies for Pilot Business have been released together with the Guidelines.