China introduces credit default swaps

China introduced its first credit-default swaps on Friday, with nine banks trading a total of US$276.3 million of derivatives, the Financial Times reported. The banks which conducted trades, which included Deutsche Bank (DB.NYSE), Industrial and Commercial Bank of China (601398.SH, 1398.HK) and China Construction Bank (601939.SH, 0939.HK), were just some of the 17 that Beijing has approved to write contracts and trade on the new market for the derivatives. Beijing is approaching the new products with caution due to the role they played in contributing to the global financial crisis. To discourage speculation, institutions trading credit default swaps must own the bonds or loans underlying the products. Credit default swaps will be sold exclusively through the Shanghai interbank clearing system, which is regulated by the National Association of Financial Market Institutional Investors (Nafmii). Nafmii operates under the People’s Bank of China.