Research On Financial Derivatives Supervising Legal System

Since the financial crisis, Chinese mainland investment in Hong Kong Bank's KODA products suffered huge losses. There was a series of disputes which were represented by KODA. The phenomenon caused the great concern and extensive discussion in financial and the legal profession. KODA is essentially a kind of derivative financial products, because its extremely complex and high risk, it was prohibited to sale in many countries. For Chinese financial market, it is a new thing, so the relative legal system on regulating theses products is lacking. Therefore, the study on supervision system has certain theoretical meaning and practical significance.The research comprises four parts.The first part is about the problem. Many investors invested the products of KODA, then the dispute from investment couldn't be resolve properly. KODA case in this paper is an example in order to raise the problem. This paper analyzes the essence of the contract and the legal relationship. In fact, KODA is a high risk of product derived from financial. One of the reasons about dispute is lack of effective supervision of financial products.The second part, combined with the first part of the issues raised and KODA-depth analysis of the product that the financial derivative product itself has a great risk. The risk is asymmetrical between the two parties of transaction, and the ability to access information is also asymmetrical. The curb exchange and cross-border transactions impact on the product. So it is necessary to supervise the derivative financial products.The third part, based on the analysis about these reasons of KODA, put forward the main problems of the supervision system about the derivative financial products in China. The lack of a sound macro-regulatory legal system and lack of definition of market players at micro level, the imperfection of the supervision system about the curb exchange and cross-border transactions, these are the main reason for these problems.The fourth part, put forward the principle of financial supervision of derivative financial products in China, concerning the major defects of the supervision system, drawing on relevant experience at home and abroad, combined with China's actual conditions. Then give suggestions of building specific system from macro level to micro level, such as the choice of supervision mechanism, a sound legal system, the supervision of market access, the supervision of information disclosure, the supervision of derivative financial products' cross-border transactions and their international cooperation, the special supervision of foreign financial institutions'derivative financial products.