China will set up a fund worth up to 800 million yuan (US$103.9 million) to compensate futures investors in case their brokers fail to pay back their margin, said China Securities Regulatory Commission (CSRC) on Friday.

According to the provisional regulations on futures investors security fund management jointly issued by the CSRC and the Ministry of Finance, the fund will start operation on August 1.

"The fund is established to maintain social stability and futures market security," said a commission official, "but the regulations do not apply to futures companies which went bankrupt or got shutdown before the issuance," he added.

Futures investors have to deposit a certain amount of margin at their brokers depending on how the market value of the contracts change.

The regulations said in case of margin losses due to irregularities and mismanagement by brokers, the fund will fully compensate investors with less than 100,000 yuan in margin loss.

For those with more than 100,000 yuan, individual investors will get 90 percent of their margin back and institutional investors 80 percent.

Nevertheless, investors will not receive compensation for loss in daily futures trade and illegal trade.

"The fund is apt to protect small and medium investors," said the official, "we hope that investors will choose well-organized companies and know more about risks in futures trade," he added.

Three futures exchanges located in Shanghai, Dalian and Zhengzhou will provide the fund. The fund will be managed by an institution designated by the CSRC and the Ministry of Finance.

The fund can be put in banks or invest in bonds, according to the regulations.

China's futures market turned over a record 21 trillion yuan (US$2.69 trillion) last year. Commodities traded on the country's futures market include corn, soybean meal, sugar, zinc and natural rubber.

As new regulations on futures trading went into effect in April, the coverage of futures trading has been extended from commodities futures trading to financial futures and option contract trading.

Experts said China's futures investors will inevitably encounter waves of restructuring and bankruptcy as its futures industry develops, the increasingly internationalized Chinese economy are intensifying calls for a mature futures market.