CHINA took another step toward diversifying financial markets Friday, approving trials of same-day “T+0” trading and options trading on certain exchange-traded funds (ETFs).

    The moves are seen as helping protect investors by allowing individuals to quickly exit collapsing stocks and giving them options as a tool to hedge their investments.

    Starting Jan. 19, bond-based ETFs, money market ETFs, gold-related ETF and ETFs that cross Shanghai and overseas markets will use the same-day stock trading system, the Shanghai Stock Exchange said in a statement posted on its website.

    The China Securities Regulatory Commission (CSRC) told reporters it would allow the Shanghai Stock Exchange to start trial trading in options for the first time, beginning with the SSE50 ETF on Feb. 9.

    The CSRC’s formal rules for options trading only slightly modified draft rules released last month, such as letting subsidiaries of futures companies participate in the experimental trading.

    The Shenzhen Stock Exchange announced the same changes for ETF “T+0” trading Friday, but the Shenzhen bourse is not involved in trial trading of options.

    The trials are expected to eventually lead to “T+0” and options trading on shares and other products listed on the exchange to boost trading activity.

    CSRC spokesman Deng Ge, however, downplayed the possibility of an immediate spread of the “T+0” system to individual stocks, saying the two were different.

    The “T+1” system, which covers the rest of the market, was originally adopted in 1995, soon after massive speculation tripled the value of the main index in just two months.

    By preventing investors from jumping in and out of positions in a single day, regulators hoped to discourage the sort of herd mentality investing behavior that could lead to a collapse.

    Regulators followed up the 1995 rule by barring stocks from rising or falling over 10 percent on a single day, further containing momentum moves. (SD-Agencies)