The China Securities Regulatory Commission plans to phase in margin trading and securities lending as it prepares to establish a new financial derivatives exchange in Shanghai next year, the South China Morning Post reported, citing a government source. Margin trading – when investors put up a percentage for the stock they buy and the broker funds the rest – is expected to be implemented before the end of the year, but the regulator's plan does not yet extend to short-selling. A company will be established to provide loans to brokerages to finance margin trades. The move will pave the way for government plans to establish a financial futures exchange in Shanghai early next year. Stock lending activity and experimentation with limited short-selling is necessary to prevent the exchange becoming "just a gambling tool" when it is opened, an analyst, who asked not to be named, said.