Study On OTC Derivatives Central Counterparty Clearing Rules Of Private Governance Perspective

Because of their unique role in risk management,over-the-counter(OTC)derivatives have been widely used globally with trading volume growing rapidly since the 1970 s.OTC derivatives trading have become one of the core modern financial activities.However,due to the high leverage and low liquidity nature of OTC derivatives,it also carries huge risk.History has shown that failure in risk control of derivatives trading could result in the collapse of world-class financial institutions.In addition,as most of the tradings are carried out among large financial institutions,repeated transactions are common,which could lead to highly concentrated positions.The default or bankruptcy of any financial institution will negatively impact its counterparties,and may lead to a chain reaction making more financial institutions default or bankrupt.This may eventually give rise to systematic risk,which causes marketwide,nationwide or even worldwide shock to the financial market.Since the financial crisis in 2008,governments and market institutions have become aware of the deficiencies in the financial market,especially the transparency and default management deficiency in the OTC derivatives market.Due to London Clearing House’s success in handling Lehman Brother’s default,the advantages of Central Counterparty(CCP)Clearing for OTC derivatives have been widely recognized.Governments have now started supporting the previously market spontaneous promotion of CCP Clearing.The corresponding supporting and regulatory measures are also gradually put in place.However,both practical and theoretical research from either finance or law field on CCP clearing is still at the primary stage in China.There is also no existing law with regard to CCP clearing.This is detrimental to the long-term development of China’s financial markets,especially OTC derivatives.This paper is divided into seven chapters(including introduction),respectively on the OTC derivatives regulatory reform after the financial crisis,the central counterparty clearing the connotation,basis and premise of central counterparty clearing,the guarantee mechanism of central counterparty clearing in the membership and customer clearing mechanism as well as the central counterparty clearing agency resilience,recovery and disposal plan for failure intensive study.The legalization of private governance in the last chapter mentioned above a series of central counterparty clearing mechanism into the paradigm was studied.The introduction reviews the financial crisis,through the analysis of the role of OTC derivatives in the financial crisis of the regulatory agencies for the OTC derivatives market to regulatory reform.Put forward at the same time,a series of regulatory reform measures have ignored the important role of private governance of central counterparty clearing agency produced.And briefly on the central counterparty clearing mechanism private governance measures are studied,including novation,netting,collateral and settlement members and clients.The first chapter the concept of "clearing" defines the connotation of "central counterparty" were clear,reviews the development history of the central counterparty clearing,and based on the rules,study the theory and law,a clear legal status of the central counterparty clearing in OTC derivatives clearing.The second chapter focuses on central counterparty clearing of the two basic system.The effect of derivatives central counterparty clearing and two legal systems: novation and net settlement,with the original counterparty and the central counterparty clearing,a counterparty and a central counterparty clearing agency the contracts to hedge risk exposure,which become net exposure.The third chapter studies the OTC derivatives central counterparty clearing the guarantee mechanism.Firstly analyses the relationship between security and related concepts,analyzes the role of collateral management;secondly on the margin as collateral from the perspective of risk management research;again for the non central counterparty clearing margin requirements for frontier the management system of exploration;effects of collateral the world’s major central counterparty clearing mechanism;finally the collateral shortages are analyzed.The fourth chapter research on the OTC derivatives central counterparty clearing members and clients in the clearing mechanism.Mainly differences between European EMIR and British regulatory rules based on liquidation for customers around the central counterparty clearing agency risk management to the main line of the new global regulatory rules and its effect are analyzed.At the same time.In Europe and the United States in two different customer clearing model,a comparative study was conducted in the framework of the Basel III.The fifth chapter studied resilience,recovery and resolution for clearing house.The central counterparty clearing agency bears all the counterparty credit risk,the entire financial system "single point of failure",the sudden interruption of service or collapse will result in a market crash.Therefore,around the topic,with some of the latest international regulatory rules and the London Clearing House for empirical study of the obtained material was introduced this year,in this regard the problem analysis.The sixth chapter puts forward the OTC derivatives market has been fully developed,in the absence of public policy intervention under the condition of the operation rules of abnormal complete private governance almost completely replaced the national regulatory functions;on the other hand,due to the differences between the private governance rules greatly,some private governance rules of success,while some private governance rules but it highlights all kinds of problems.Therefore,how to measure the private governance of this series of laws is worthy of study.The sixth chapter puts forward the specific approach.