* CSRC says conditions ripe for the launch of commodity options
* China to retain ban on overseas exchange's warehouses in free-trade zone
* Says ban needed to ensure stability and growth of local exchanges (Recasts with regulator comments on commodity options)
SHANGHAI, Oct 25 (Reuters) - Conditions are ripe for the launch of commodities options, China's securities regulator said on Friday, a sign that it will soon approve some of the options contracts proposed by local futures exchanges.
China's securities watchdog currently bars options trading, but all of China's commodity exchanges, including the Dalian Commodities Exchange, the Zhengzhou Commodities Exchange and the Shanghai Futures Exchange, have lodged proposals to launch options on some of their contracts.
The country's regulators are moving to enhance risk hedging options to support further financial reforms.
"The futures exchanges have done a lot of research and preparation on options trading and the conditions are now ripe for their launch," the China Securities Regulatory Commission (CSRC) said on its online microblog.
"We will work closely with the exchanges and brokerage firms to develop the options market."
Beijing is turning to financial innovation to drive growth as the world's second-largest economy has shown signs of slowing sharply from the double-digit growth rates set during the last decade.
Options trading will also give manufacturers another hedging tool against fluctuations in commodities prices.
Dalian Commodity Exchange hopes to launch options trading for its soymeal contract in May next year, the bourse's trading director Zhang Yingjun told Reuters on Friday.
China will launch simulated trading in stock index options on Nov. 8, official media reported on Wednesday.
The CSRC also said it will retain a ban on overseas commodity exchanges setting up warehouses on the mainland, including the new Shanghai free-trade zone, confirming an earlier Reuters report.
"To ensure economic stability and growth of the domestic futures exchanges, foreign bourses will not be allowed to have warehouses on the mainland for the time being," the CSRC said.
The Shanghai Futures Exchange lists futures in copper, aluminium, zinc and lead, placing it in direct competition with the London Metal Exchange for traders looking to hedge against or speculate on price movements for physical metal. (Reporting by Fayen Wong; Editing by Michael Urquhart)