SHANGHAI, Aug. 17 -- THE Chinese mainland stock regulator plans to allow selected foreign institutions trade the first stock-index futures in the nation under a strict quota system, industry sources said yesterday.

Overseas institutions under the Qualified Foreign Institutional Investor, or the QFII, scheme will be granted licenses to trade the futures, which are set to debut within the year, said people briefed on the matter.

The combined quota for futures trading may be capped at one-tenth of the existing US$10 billion QFII limit, under which overseas investors are allowed to trade yuan-denominated shares, the sources said.

Institutions will likely be offered separate futures quotas based on their weightings in the QFII program, according to the sources.

An official at the China Securities Regulatory Commission declined to comment on the issue yesterday.

Foreign institutions including UBS AG and Goldman Sachs Group late last year lobbied Chinese authorities for access to futures trading, insiders told Shanghai Daily earlier.

The sources noted that the watchdog has worked out draft rules for foreign participation in futures trading but has yet to agree on certain issues such as risk management.

China set up its financial derivative bourse in September as part of preparations for the launch of a range of products, the first of which will be stock index futures contracts.

The CSRC is expected to complete issuing licenses by next month to domestic futures brokerages to trade the index futures, which are based on the CSI 300 index tracking the biggest 300 mainland-listed firms.

Industry experts noted that financial institutions might first use the index futures to hedge against risks in buying stocks and the futures market won't feature hectic trading initially.