The Legal Regulation Of Financial Derivative Transaction And The Reconstruction Of China’s Regulation System

Since the 1980’s, the financial derivative markets of various countries in worldwide had acquired swift development. The transaction varieties were incessantly expanding and the financial derivative products system which comprises interest rate derivatives, currency derivatives and stock derivatives had been gradually formed. The most significant reason for financial derivatives’such prominent development is that they cater for the intense demand of the investors for the risk-transference financial innovation.At present, China’s financial derivative market has come through for nearly 20 years. An integrated financial market system consisting of capital market, currency market and derivative market has been primarily founded, and it operates as a powerful financing channel for the substantial economy. A series of laws regulating the financial derivative market have been constituted which confirm the market investing body, and the laws give legal respect and promotion to the development of financial derivative market. China has achieved some prominent success on the financial derivative regulation. In the first place, the legal system regulating the financial derivative transaction is basically shaped. Secondly, the laws providing the legal support for the simultaneous development of exchange-traded derivatives and over-the-counter derivatives have been in operation. Furthermore, the interest rate derivatives and currency derivatives have processed explosive and instructive transaction attempt and legal system establishment.At the same time, China’s current regulation system of financial derivative market has a plenty of shortcomings such as the many-headed supervision of financial derivative market. Such supervision mode debases the supervision efficiency and increases the supervision cost, and it results in power contention among the government supervision departments. Furthermore, most laws regulating derivative transaction are lower-ranked which were enacted by departments and lack stability.Consequently, for promoting our financial derivative market’s healthy development, the supervision ability must be improved and the legal regulation system should be consummated. On the one hand, we should learn the supervision experience from developed financial derivative markets. On the other hand, we will bring domestic regulation system into the global regulation system and actively participate in establishing international regulation framework.What is more important, we should attempt to reconstruct the regulation systems of exchange-traded and over-the-counter derivatives markets on the full consideration of our financial market’s maturity degree and the investors’demands. The reconstruction should be started with the combination of supervision bodies, and a unite governmental supervision department acting as the special and leading supervision body which takes charge of constituting supervision policies and executing them. In the next place, the function of exchange and settlement institution should be enlarged, changing from acting as transaction go-between to having double functions of transaction matcher and risk manager. Meanwhile, the self-discipline organizations of financial derivative transaction should assume more supervision functions than nowadays actuality. The admittance system of financial derivative market should also be reconstructed. The new admittance system will be discriminating according to the classification standards of investor and derivative products. With regard to the regulation system reconstruction of over-the-counter transaction, the key measures are establishing centralized settlement institution and unite database of financial derivative transaction. The database will collect all kinds of transaction information from over-the-counter derivative markets and periodically deliver the data information and analysis reports to the leading supervision department. Furthermore, the government supervision should be weakened while the supervision function of self-discipline organizations in over-the-counter derivative markets will be enhanced.