Analysis Of The Legal Application Of NAFMII Main Agreement In The Exchange Of OTC Derivatives In China

In order to better develop and improve China’s financial derivatives market,the Association of Interbank Market Traders(NAFMII)has introduced the NAFMII Master Agreement in 2009,drawing on and referring to the relevant systems and arrangements in the ISDA Master Agreement.Interbank market participants,including non-banking market participants,will widely apply and invoke the single agreement system,early termination system,and net settlement system established in the main agreement when conducting off-exchange financial derivatives transactions.And other relevant rules,NAFMII master agreement as an industry practice,occupy an important role in the substitution of China’s financial derivatives.Unfortunately,the net settlement system for China’s counterparties has not been legislated in our country,and there is no clear regulation on the applicability of the rules for the termination of net settlement in bankruptcy in China.The institutional basis for the termination of net settlement is the "single agreement system" and "early termination",which also have the same obstacles as the existing legal system.It can be said that the above three important rules complement each other,but they do not have legitimacy at the legislative level and effectiveness in implementation.The body of this article is divided into four chapters.The first chapter is proposed as a problem.This chapter starts with the importance of derivatives trading in financial markets.The net settlement system starts with the importance of derivatives trading.It leads to the two core systems of the NAFMII master agreement: the "single agreement system" and the "early termination system" as the preconditions and basis for application.The three are closely related and complement each other.This paper analyzes the necessity and importance of the three systems in China’s derivatives trading market and financial market in accordance with the logical order of institutional construction and application,as well as its conflict analysis with the existing legal system in China.The second chapter analyzes and studies the single agreement system.This chapter begins with the conclusion of whether derivatives trading must be signed with the ISDA Master Agreement or the NAFMII Master Agreement to proceed with the practice of the two opposing views of the Court.From a theoretical point of view,the conflict between the single agreement system and the current legal system in China is mainly focused on the theory of contract effectiveness.Bankruptcy and the principle of fair compensation.Then from the perspective of domestic theory and judicial cases,the above issues were analyzed and answered.After combining the framework of the international ISDA main agreement framework documents and the relevant US legal systems,it puts forward suggestions for the improvement of related systems in China.The third chapter analyzes and studies the early termination system.In this chapter,starting from the case of Yingda Company’s breach of contract,it is pointed out that the focus of the dispute in practice is on the scope of the final determination of the termination of the payment,and in particular,whether the net profit and loss should include transactions that have not reached the settlement period.Then theoretically analyzes that the conflict between the automatic early termination system and the current legal system in China is mainly focused on the liability for breach of contract law in the "Contract Law" and the right of management of the "Enterprise Bankruptcy Law".Then,in terms of theory,the author can expect benefits from thecontract law,and analyze the requirements for the exercise of the revocation rights of the bankruptcy law.By referring to the US Bankruptcy Law’s automatic freezing system,the author puts forward sound proposals for domestic related systems.Chapter IV analyzes and studies the termination of the net settlement system.This chapter starts from Liugong’s forward transaction case and points out that the meaning of differential settlement is the key to identifying a bad trade.The first thing that needs to be solved is what is the legal nature and the key factor of rolling-off,rolling-out,and whether the winding-off is a legitimate theoretical basis for the settlement of financial derivative transactions.Then from a theoretical point of view,it is analyzed that the conflict between escalation and the current legal system in China is mainly focused on whether the miscarriage settlement is a repayment behavior or an offsetting behavior.After that,the author starts from both theoretical and practical perspectives,and dialectically analyzes the net value at home and abroad.The positive and negative views of settlement,and suggestions for the improvement of relevant domestic systems.It is pointed out that China should establish an effective and enforceable net settlement system for termination,but it still needs to limit the scope of the applicable derivative contracts and the scope of rights.Finally,by giving legal confirmation to the relevant systems of financial derivatives,we can improve the construction of the corresponding legal system,give full play to the positive functions of the market,promote the participation of Chinese financial institutions in international competition and achieve pricing rights,effectively suppress their negative impact,and ensure global Financial security and financial stability.