Guidelines for the Participation in Stock Index Futures Trading by Qualified Foreign Institutional Investors

(Promulgated by the China Securities Regulatory Commission on, and effective as of, May 4 2011.)

Announcement of the CSRC [2011] No.12

Article 1: These Guidelines have been formulated pursuant to provisions such as the Measures for the Administration of Securities Investments in China by Qualified Foreign Institutional Investors (Order of the CSRC No.36) and the Provisions on Foreign Exchange Control in Connection with Securities Investments in China by Qualified Foreign Institutional Investors (Announcement of the State Administration of Foreign Exchange [2009] No.1) in order to regulate the participation in stock index futures trading by qualified foreign institutional investors (QFIIs).

Article 2: For the purposes of these Guidelines, the term “stock index futures” means financial futures contracts, the subject matter of which is a stock price index, that are approved by the China Securities Regulatory Commission (the CSRC) and that are listed and traded on the China Financial Futures Exchange (the CFFEx).

Article 3: QFIIs that participate in stock index futures trading may only engage in hedging transactions and do so in accordance with relevant provisions of the CFFEx.

Article 4: When a QFII participates in stock index futures trading, it shall comply with the following requirements, unless otherwise specified by the CSRC:

(1) at the end of any trading day, the value of the stock index futures contracts held by it may not exceed its investment limit;

(2) during any trading day, its transacted amount of stock index futures (excluding the closing of positions) may not exceed its investment limit; and

(3) other provisions of laws and regulations.

If the value of the futures contracts held by a QFII is in violation of the foregoing provisions due to price fluctuations in the securities and futures markets or other such reasons, it shall complete an adjustment within 10 trading days.

Article 5: A QFII that wishes to participate in stock index futures trading shall carry out matters such as account opening and applying for a hedging limit in accordance with relevant provisions of the CFFEx. If a change in its investment limit occurs, a QFII shall report the same to the CFFEx within three working days. If a QFII needs to revise its hedging limit, it shall do so in accordance with relevant provisions of the CFFEx.

Article 6: A QFII that is to participate in stock index futures trading shall apply to the CFFEx for a trading number for each fund account that it has been approved to open by the People's Bank of China and the State Administration of Foreign Exchange (Safe). Each of the fund accounts of a QFII that is used to participate in stock index futures trading shall be operated separately.

Each QFII may appoint not more than three domestic futures companies to carry out stock index futures trading on its behalf.

Article 7: A QFII, custodian and futures company shall determine, in accordance with the relevant provisions of the CFFEx, the trading settlement model for the stock index futures trading participated in by the QFII, clarify rights and obligations in matters such as transaction execution, fund transfer, fund settlement, accounting and margin deposit and establish a fund safety assurance mechanism.

Article 8: A QFII shall perform its information disclosure obligations in a timely manner in strict compliance with relevant laws, regulations and the relevant business rules of the CFFEx.

Article 9: A custodian and futures company shall strictly implement relevant provisions on the participation in stock index futures trading by QFIIs, strengthen their monitoring, checking and risk control in respect of the trading by QFIIs, punctually perform their responsibility of statistical compilation and reporting of data required by the CSRC and Safe and, in a timely manner, report unusual transactions and violations of laws and regulations that they discover.

A custodian shall regularly report to the CSRC on the investment and trading relating to a QFII's participation in stock index futures trading.

Article 10: The CFFEx shall effect administration over the hedging limit, trading, etc. relating to the participation in stock index futures trading by QFIIs, and regularly report to the CSRC and Safe on the approved hedging limits of QFIIs.

Article 11: If a QFII commits a major violation of a law or regulations in the course of participating in stock index futures trading, the CSRC will take penalty measures against it in accordance with the law.

Article 12: For the purposes of these Guidelines, the term “investment limit” means the amount of the investment principal that has been approved by Safe and actually remitted in by the QFII or adjusted and confirmed by Safe.

Article 13: These Guidelines shall be effective as of the date of promulgation.