Interim Provisions on Administration of Domestic Stock Index Futures Investments
by Qualified Foreign Institutional Investors

(Request for Comments)

This English document is translated from its Chinese version. In case of discrepancy, the original version in Chinese shall prevail.

Whereas it is imperative to closely regulate the domestic Stock Index Futures (hereinafter referred to as SIF) investments’ activities of the qualified foreign institutional investors (QFIIs), in accordance with People’s Republic of China’s Measures on Administration of Domestic Securities Investments by Qualified Foreign Institutional Investors promulgated as Decree No. 36 of China Securities Regulatory Commission, People’s Bank of China and State Administration of Foreign Exchange, Provisions on Foreign Exchange Administration of Domestic Securities Investments by Qualified Foreign Institutional Investors promulgated as Decree [2009] No. 1 of State Administration of Foreign Exchange, and other relevant laws, this regulation is hereby formulated.

Article I The term “Stock Index Futures (SIF)” refers to any financial futures contract which is based on stock indices, listed and traded in China Financial Futures Exchange (CFFEX) upon approval by the China Securities Regulatory Commission (CSRC).

Article II The QFIIs investing in SIF are only permitted hedging by complying with the relevant regulations of CFFEX and following the Risk Management Principles.

Article III The QFIIs investing in SIF must meet the following requirements unless the exclusions of CSRS apply:
1. The total value of SIF contracts held by a QFII shall not exceed its total amount of investment at the end of each trading day;
2. The total value of SIF contracts held by a QFII shall not exceed its total amount of investment within each trading day;
The term “total amount of investment” in Item 1 and 2 refers to the principal remitted inward within the approved quota of State Administration of Foreign Exchange (SAFE);
3. Other circumstances as prescribed by the laws and regulations;
The nonconformity of the value of SIF contracts caused by the market price fluctuation and its relevance can be exempted only if the QFII adjusts the investment position within 10 trading days after occurring.
Article IV QFIIs shall comply with the relevant regulations of CFFEX when applying tothe new accounts, hedging quota and so on.  QFIIs shall report to CFFEX within 3 working days when the total amount of investments is changed. QFIIs shall comply with the relevant regulations when the hedging quota needs adjustment.

Article V QFIIs holding different securities accounts shall apply to CFFEX for separate trading code for SIF investment. QFIIs shall ensure the independence of the account management.
One QFII are permitted to entrust 3 domestic futures companies for the service of domestic SIF trading.

Article VI QFIIs and its custodians shall specify the method  of settlement, predefine the rights and obligations in transaction, cash transfer, clearing, accounting process, deposit custody and other relevant business activities, and establish financial security assurance mechanisms during the investment activities in accordance with relevant regulations of CFFEX.

Article VII QFIIs shall strictly fulfill the obligation of information disclosure in accordance with the relevant laws and regulations of CFFEX.

Article VIII Custodians and futures companies shall strictly comply with the regulations related to domestic SIF investment by QFIIs and enhance supervision, auditing and risk control on the actions of QFIIs’ investment. Custodians and futures companies shall report to CSRC and SAFE in time when abnormal trading or violations of the laws or regulations are detected.
Custodians shall report QFIIs investing and trading status .to CSRC every month.

Article IX CFFEX shall closely regulate QFIIs’ activities in domestic SIF investments of in accordance with the laws and regulations and periodically report QFIIs’ hedging quota and applications of to CSRC and SAFE.

Article X CSRC will, in accordance with the laws and regulations, impose penalties when a serious violation occurs in any domestic SIF investment activity of QFIIs.

Article XI The Regulation shall come into force from the date of promulgation.