reuters | China's securities regulator on Friday urged commodity futures exchanges to curb excessive speculation following a surge in prices that has sparked fears markets were heading for a dangerous boom-and-bust cycle.
The China Securities Regulatory Commission (CSRC) said it would not allow the futures market to become a "hot-bed" for speculators.
The CSRC comments confirmed a Reuters story earlier on Friday that the regulator had asked commodity futures exchanges in Dalian, Shanghai and Zhengzhou to bring speculative trading activity under control.
Investors, including hedge funds and retail investors, have placed big bets on Chinese commodities futures this year, driving up contracts including in iron ore, rebar, cotton and even eggs. The rally has prompted many analysts to warn of similarities with a boom in the country's stock markets, which reversed into a sharp crash last summer.
The futures market should stick to its fundamental purpose of serving the real economy, and regulators will "adamantly prevent the futures market from becoming a hotbed for short-term speculators," the CSRC said in a statement on its official microblog.
"We will continue to guide the exchanges to take appropriate actions against excessive speculation and illegal behaviors," the regulator said.
Three people with direct knowledge of the situation said the CSRC had issued its order to the exchanges to bring speculative trading under control on Monday.
In response, the exchanges ordered major institutional investors that lack a commodities background to rein in their trading, the people said. They didn't define what was meant by a lack of background in commodities.
"Many local media and researchers mentioned the huge volume and volatility," said one of the people. "The regulator felt nervous. They hope to keep stability."
A spokesman at the Dalian Commodity Exchange declined to comment on the CSRC order, but said the exchange would further improve its mechanism for controlling risks.
The Shanghai Futures Exchange did not immediately respond to a request for comment. The Zhengzhou Commodity Exchange could not be reached for comment.
The sources said the latest measures were partly aimed at cracking down on high-frequency trading, although they did not provide further details.