China's securities regulator has given its first strong signal of action against rampant off-exchange futures trading over the last two years.

Illegal and covert futures activities have been on the rise in recent weeks and the regulator will work with the public security departments to resolutely crack down on these activities, Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said in a speech at the 12th China Shenzhen International Derivatives Forum on Dec. 3.

China faces grave challenges in financial risk prevention, Fang said. The country must prevent risks associated with illegal futures trading from occurring on a large scale, given the large number of recent risk events in the peer-to-peer online lending industry, he said.

Illegal trading such as silver and oil investment has emerged across China in recent years. Spot transactions are not covered by financial regulation and financial frauds have been aggravated as a result. Offenders have gotten off scot-free and investors have found it very difficult to protect their rights. Industry experts believe the CSRC's recent moves are intended to lay the groundwork for systematic and routine regulation against illegal futures trading.