China is moving to curb “snowball” derivatives after brokers hiked returns to near-record levels to attract investors to the risky products following a stock-market selloff, according to people familiar with the matter.
Officials this week told some of the biggest brokerages to suspend any increase in their net exposure to over-the-counter derivatives involving domestic A shares, including snowball products which are based on options contracts, said the people. While the restrictions are temporary, the regulators didn’t indicate when they may be lifted or eased, the people said, asking not to be identified as the communications are private.
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