SHANGHAI, Aug. 7 -- Chinese mainland stock markets have no plans to limit the amount of warrants brokers can issue over listed firms' shares as they pursue a market-based mechanism to curb speculation, a senior exchange official was quoted as saying yesterday.

Brokerages should make their own decisions on how much warrants to issue based on supply and demand and there's no need for exchanges to intervene, the Shanghai Securities News said, citing Liu Xiaodong, vice general manager of the Shanghai Stock Exchange.

Liu's comment came at a time when the market speculated that regulators might restrict the issuance of warrants by brokers, who some investors argued have dampened the derivative's prices by largely raising supply.

The stock regulator and bourses were likely to limit the combined size of warrants launched by brokers to up to 50 percent of those issued by controlling shareholders at a listed firm, earlier media reports said, citing sources.

Now, brokerages are prohibited from creating warrants over a public company's shares before the firm's big stake owners unveil such derivatives to retail investors.

Brokers are expected to create warrants when demand is strong while they can also scrap them when supply catches up, a mechanism that works to keep the overall scale steady, the newspaper said, citing Liu.

In addition, the increased supply can help cool the sizzling and irrational prices of some warrants, which will shield the interest of investors on a broad basis, Liu was quoted as saying.

Officials at the Shanghai and Shenzhen stock exchanges were not available to comment yesterday while the China Securities Regulatory Commission declined to comment.

The mainland bourses started on August 1 to require investors to sign a risk acknowledgement notice with brokers before they begin trading warrants in the latest attempt to curb potential misconduct.

The exchanges last month unveiled a set of guidelines to restrict investor accounts suspected of conducting abnormal warrant trading and ordered brokerages to boost oversight.

Authorities have yet to give a clear timetable for the launch of covered warrants, a move that will let brokers issue warrants on any listed firms' stocks.