Research On The Rebuilding Of China Forex Futures Market

From the birth of forward exchange, the China forex derivatives have been traded for about 20 years. After a years-long hold-up of redesign, China forex futures market has still not come to existence. The lack of this market not only impacts adversely on the effectiveness of China forex policies, but also limits further developments of economic bodies, which harms the stability of the economy. As the Chinese economy and its connection with the world grow stronger, it is necessary and urgent to rebuild China forex futures market in the near future. After the establishment of China Financial Futures Exchange on Sept.8, 2006, several financial futures are now in plan, including forex future. The key point is how to rebuild the forex future market as well as to improve it.Due to improper legislation, supervision and risk-controlling, the whole financial derivatives market finally failed in the past. This failure, especially the shut-down of the government bonds futures market, provides good lessons for the rebuilding of China forex futures market. Moreover, the development of China commodity futures market provides for the rebuilding practical experience in risk controlling, basic regulations, innovation and cooperation. This paper also analyzes and draws lessons from the following three aspects: the effective three-level supervising system of American financial derivatives market and the endeavor to deregulate this market; the policies arrangements of the South Korean one and the reason why it develops so fast; why the Singapore Exchange is so outstanding among so many exchanges in the world.In the last part, this paper gives several advices on the rebuilding of China forex exchange market, which are the main innovative points of the paper. Forex futures market is built on spot forex market, so it is necessary to improve the imperfect China spot forex market. While sticking to its three-level supervising system leading by the government, China should reinforce each level and improve the cooperation among the three levels. China also should improve its market and supervision according to laws, but the market efficiency must be taken into account while setting up laws and regulations. Setting up independent clearing company holding by exchanges matches the historic and present situations in China, and it is a better way to promote the market efficiency as well as to control risks. Besides, it is necessary to have a set of risk-controlling system for the exchanges to grow and to control the market. At last, exchanges should do their best to innovate in aspects such as products, operation, technology, etc. Exchanges also should pay extra attention to international cooperation and communication.