China Asks Fund Managers to Restrict Short Selling of Stock Index Futures

China’s regulators have made a request to some hedge fund managers to restrict short selling across its stock index futures market, according to the report by Reuters that cited two sources.

Beijing has been trying to stabilize its sinking stock market as it is now one of the worst performers in the region this year. The Shanghai Composite is now  down 6.6% for the year, while Shenzhen Component Index fell 10.8%.

Reuters reported that a hedge fund manager received calls from China’s financial futures exchange that told the manager to be cautious against reckless short selling, especially the naked short selling in the market that was not for hedging purposes.

Meanwhile, another report from different hedge funds told Reuters that regulators informally asked the firm recently not to short sell for speculative purposes.


Last week, Bloomberg reported by citing people with knowledge of the matter that China’s largest brokerage, Citic Securities, has restricted short-selling for some clients following noticeable losses in local stock markets.

Not only did Citic Securities stop lending stocks to investors, it also raised requirements for institutional clients earlier this week as well, which turned out to be instructions from regulators.

A week before that, Beijing reportedly told its major brokerages to support local stocks and funds by purchasing exchange-traded funds off the open market.