China’s securities regulator approved the launch of cotton yarn futures on the Zhengzhou Commodity Exchange, according to an official statement.

The cotton yarn futures, together with the cotton futures that already trade, will help companies in the industry to hedge against and improve the management of risks, the China Securities Regulatory Commission said.

Futures contracts oblige investors to buy or sell underlying assets at a predetermined price at a specified time, helping investors mitigate risks of price volatilities.

Large and frequent fluctuations in cotton yarn prices have had negative impacts on related industries in the past few years, and the launch of the cotton yarn futures will be an answer to market demand, the CSRC said.

The date for the start of trading will be announced later, it said.