Shanghai Futures

Last week marked the start of trading in futures on the Shanghai Composite Index, with the first trade carried out by CITIC and HSBC.

I have pointed out before in various columns that the limited trading optionson the Chinese exchanges has accounted for a massive 68% differential in dual listed Hong Kong and Chinese shares. Aside form the fact that you can't sell a Chinese "A" share short, there pretty much only stocks or real estate if you want to get bang on your yuan higher than the overnight borrowing rate.

In the past few years, many have criticized derivatives products for contributing volatility to the market. This is a great example of how derivatibes help to stabilize and normalize a market, however.