According to the WeChat public account of the China Securities Regulatory Commission, on April 20, 2022, the 34th session of the Standing Committee of the 13th National People's Congress voted to pass the Futures and Derivatives Law of the People's Republic of China (hereinafter referred to as the Futures Law). The formulation of the Futures Law, guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, implements the decision-making and deployment of the central government on improving the construction of the capital market infrastructure system, takes serving the real economy, preventing and controlling financial risks, and deepening financial reform as the starting point and foothold, adheres to the direction of marketization, rule of law and internationalization, comprehensively and systematically stipulates the basic systems of the futures market and the derivatives market, and provides a strong legal guarantee for building a standardized, transparent, open, dynamic and resilient capital market. It has very important and far-reaching significance. The formulation of the Futures Law has made a series of institutional arrangements on the basis of summarizing historical experience and drawing on beneficial international practices.
The first is to focus on regulating the futures market and taking into account the derivatives market. The legal nature and basic positioning of the futures market and the derivatives market are generally the same, and the two are deeply integrated, complementary and closely linked, and jointly serve the real economy. However, the futures market and the derivatives market have developed to varying degrees. The Futures Law proceeds from the actual situation of the market and considers two markets as a whole: on the one hand, the system stipulates the basic system of the futures market such as futures trading and its settlement and delivery, establishes a trader protection system, regulates the operation of market entities such as futures business institutions, futures trading venues, futures settlement institutions and futures service institutions, and clarifies the supervision and management of the futures market. On the other hand, the inclusion of derivatives transactions in the scope of legal adjustment, fully absorbing the consensus reached by the G20 after the global financial crisis on strengthening the supervision of derivatives, drawing on the experience of mature international markets, establishing a basic system for derivatives trading such as a single master agreement, termination netting, and transaction reporting library, and authorizing the State Council to formulate specific management measures so that the development of the derivatives market "has a law to follow".
Second, on the basis of summarizing and refining existing experience, we should reserve space for reform and innovation. The relationship between the stability of the futures law and the reform and innovation of the balanced system: On the one hand, summarizing the development experience of the futures market for more than 30 years, the systems and practices such as futures trading, settlement and delivery, and financial market infrastructure operation supervision that are well-run and mature in practice are affirmed at the legal level, and the regulatory system with Chinese characteristics such as margin monitoring and real-name account system is determined to stabilize market expectations and adapt to the characteristics of market development at the current stage. On the other hand, in line with the development trend of the market, we have broken down the institutional and institutional obstacles to the development of the futures market, made innovative arrangements in terms of the listing mechanism of varieties, the business scope of futures companies, and the diversification of margins, and played a forward-looking and leading role in legislation to provide support for market reform and innovation.
The third is to give play to the function of the futures market and enhance the ability to serve the real economy. Focusing on the main line of serving the real economy, the Futures Law has made institutional arrangements for promoting the function of the futures market: it clearly stipulates that the state supports the healthy development of the futures market and gives play to the functions of market price discovery, risk management and resource allocation; Encourage entity enterprises to use the futures market to engage in risk management activities such as hedging, and clarify the exemption of position limits; Special provisions provide for measures to promote the development of agricultural futures markets and derivatives markets, and guide the production and operation of domestic agricultural products; Establish a market-oriented listing mechanism for varieties, stipulate the basic conditions for listing varieties in principle, optimize the listing procedures of varieties, enrich futures varieties, and improve product structure; Expand the business scope of futures companies, and reserve legal space for enhancing the operational capabilities and risk management capabilities of futures companies and better serving entity enterprises.
The fourth is to strengthen the prevention and control of market risks and maintain national financial security. The formulation of the Futures Law will take the prevention and resolution of market risks as the top priority, further improve the risk control system, and consolidate the foundation for the stable operation of the market. Stipulate that futures trading implements risk control systems such as position limit, same-day debt-free settlement, and forced liquidation, and clarifies the legal status of the central counterparty of futures settlement institutions; Improve the risk identification, prevention and disposal system system of the futures market, strengthen the front-line supervision responsibilities of futures trading venues, stipulate emergency measures for abnormal situations and emergency disposal measures, improve the market monitoring and monitoring system, and build a three-dimensional and diversified risk prevention and control system; Strengthen supervision and management, increase the punishment of violations of laws and regulations, significantly increase the cost of violations of laws and regulations, and effectively maintain market order.
The fifth is to build a trader protection system and increase the protection of ordinary traders. In order to reflect the people's nature of supervision, the Futures Law highlights the protection of ordinary traders and constructs an institutional system for trader protection: establish a system of classification and appropriateness of traders; The system stipulates the trader protection system and clarifies the rights and interests enjoyed by the trader; It is forbidden for futures trading venues, regulators and their staff, employees of futures business institutions and other special entities to participate in futures trading, to prevent conflicts of interest; The comprehensive system stipulates that futures operators are prohibited from engaging in codes of conduct that harm the interests of traders; Improve the civil legal liability system of the futures market; Introduction of a party commitment system; Improve multiple dispute resolution mechanisms.
The sixth is to benchmark international best practices and build a new pattern of opening up the futures market to the outside world. Expanding opening up to the outside world is the only way to improve the core competitiveness and international influence of the mainland futures market, and the formulation of the futures law has filled the gap in the legal system for foreign-related futures trading. Clarifies the extraterritorial effect of the law; From the two aspects of "bringing in" and "going out", it stipulates that overseas futures trading venues, overseas futures business institutions, etc. provide services to China, as well as the code of conduct that domestic and foreign traders should abide by in cross-border transactions, and build an institutional system for interconnection and interconnection of domestic and foreign markets; To adapt to the pattern of opening up to the outside world, arrangements have been made for the establishment of a cross-border supervision and cooperation mechanism between the Futures Supervision and Administration Agency of the State Council and overseas regulatory agencies, and the framework and principles for cross-border supervision and management.
In the next step, the CSRC will conscientiously study and implement the Futures Law, fully understand the great significance of the promulgation of the Futures Law, fully understand and grasp the relevant systems and measures stipulated in the Futures Law, accelerate the formulation, revision and improvement of supporting rules and regulations, improve the basic system of the futures market, strictly implement the provisions after the formulation of the law, continuously improve the level of supervision and law enforcement, give full play to the positive role of the Futures Law in promoting market reform, maintaining market order, and promoting the function of the market, and actively and steadily promote the construction of the futures market. Better serve the high-quality development of the real economy.