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China unveiled rules Monday allowing companies to issue warrants, in a bid to add depth to its fledgling securities market and to facilitate its efforts to make State shares tradeable on bourses.

The country’s two stock exchanges published the regulations in the China Securities Journal on Monday, effective immediately.

The warrants are the first financial derivative launched by the mainland’s bourses since 1995, when the Central Government shut down trading in treasury bonds on the Shanghai Stock Exchange.

“Warrants could help investors find value in stocks and manage risks,” an unamed official was cited by the newspaper as saying.

The instrument gives the holder the right but not the obligation to buy or sell securities at an agreed price over a certain period, according to the rules.

“A monotonous diet of financial products has affected the efficiency and activity of the domestic securities market,” the official said, adding warrants offer higher yields but also greater risks.

Firms holding at least 300 million freely floated shares — worth no less than 3 billion yuan (US$362 million) traded in the last 20 trading days — may apply to issue no less than 50 million warrants, which when floated should have maturities of six to 24 months.

All issuers must keep enough securities or cash in a specific account as a guarantee, or have a guarantor. When the warrants are listed, a single deal must not exceed 1 million warrants.