The approval from the China Securities Regulatory Commission will give JPMorgan access to China's futures exchanges in Shanghai, Zhengzhou and Dalian, giving it a presence in one of world's fastest growing futures markets û turnover in Shanghai, which accounts for 60% of the market, has grown from Rmb667 billion ($88.6 billion) in 2000 to Rmb12.6 trillion last year.
"This joint venture gives us the opportunity to bring our global reach and expertise to new markets," says Jerome Kemp, joint chief executive of JPMorgan's ever-expanding futures and options business û the firm has been a leading foreign entrant in emerging markets around Asia and the world and is currently working on plans to start trading on exchanges in Brazil, Dubai and Mexico.
In China, JPMorgan is the first foreign player to enter the market since new regulations came into effect in April.
It is not clear yet how the partnership will be structured as the two parties are still working with Chinese regulators to finalise the exact make-up of the joint venture. Sources involved in the process say the business could be up and running by early 2008, subject to a few lesser approvals from various entities.
China's brokers can trade futures contracts on various metals, energy and chemicals commodities, but the new China Financial Futures Exchange (CCFE) will eventually allow them to buy and sell futures on stock indices, foreign exchange and equities.
China first launched futures in the early-1990s but authorities closed the market down after rampant speculation led to a treasury bond crisis. Fears about speculation are also thought to have delayed the launch of stock index futures, which was originally scheduled for the first half of this year.
Regulators are now expected to give the go-ahead to trading stock index futures on the CCFE by November, starting with contracts on the Shanghai Shenzhen 300 index first on the auction block. However, JPMorganÆs commodities licence isnÆt thought to confer any special advantage in winning a licence to trade other types of futures contracts.
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