China’s risk clamp down hits commodity trades, niche broker business

New rules in China aimed at curbing risk and speculation have triggered an exodus of institutional cash from the country’s commodities futures markets and hobbled a thriving niche business for brokers.

Before the ban, futures brokers were launching hundreds of structured products a month offering guaranteed returns, which attracted institutional cash and fed billions of dollars into the commodity futures markets.

Now, fresh launches are just a trickle as the brokers comply with new rules that include a ban on guaranteed returns. With no promise of big returns, the 100 brokers or so that run asset management businesses offering these products are struggling to keep clients.