China's securities regulator has recently approved the launch of cotton yarn futures on the Zhengzhou Commodity Exchange, according to an official statement.
The cotton yarn futures, together with the cotton futures that already traded, will help companies in the industry to hedge against and improve the management of risks, the China Securities Regulatory Commission (CSRC) said.
Futures contracts obligate investors to buy or sell the underlying assets at a predetermined price at a specified time, helping investors mitigate risks of price volatilities.
Large and frequent fluctuations in cotton yarn prices have had negative impacts on related industries in the past few years, and the launch of the cotton yarn futures will be an answer to market demand, the CSRC said.
The date for the commencement of trading will be announced later, it said.
China has been developing its commodity derivatives market and plans to gradually open it up to foreign investors. Earlier in April, the country launched white sugar options, the second commodity options after soybean meal.