On April 20, according to Xinhua News Agency, the 34th meeting of the Standing Committee of the 13th National People's Congress voted to pass the "Futures and Derivatives Law of the People's Republic of China", which will come into effect on August 1, 2022.

China Times (www.chinatimes.net.cn) reporter Ye Qing Beijing report

html On April 20, according to Xinhua News Agency , the 34th meeting of the Standing Committee of the 13th National People's Congress voted to pass the "Futures and Derivatives Law of the People's Republic of China" (hereinafter referred to as the "Futures and Derivatives Law"), which will come into effect on August 1, 2022.

The CSRC stated that in the next step, we will earnestly study and implement the Futures and Derivatives Law, fully understand the great significance of the promulgation of the Futures and Derivatives Law, fully understand and master the relevant systems and measures stipulated in the Futures and Derivatives Law, accelerate the formulation, revision and improvement of supporting rules and regulations, improve the basic system of the futures market, strictly implement the provisions after the law is formulated, and continuously improve the level of supervision and law enforcement.

htmlOn April 18, the third draft of the "Futures and Derivatives Law" was submitted to the 34th meeting of the Standing Committee of the 13th National People's Congress for review. The third draft further strengthens the supervision of derivative transactions and effectively prevents financial risks. As an important part of the capital market, the futures and derivatives market have always lacked a "basic law" in the past. The formulation of this round of "Futures and Derivatives Law" was launched in 2013, and it has been 8 years since it was launched.

Several industry experts interviewed by reporters from " China Times " said that after the implementation of the "Futures and Derivatives Law", it will help international capital enter the domestic capital market to engage in secondary market investment. In addition, futures operating institutions have also clarified their behavioral boundaries and legal basis. For example, there were various explanations and understandings about forced closing positions in the past. This time, the law will include forced closing in this way, which will help clarify the behavioral boundaries of futures operating institutions.

helps foreign capital to influx into the secondary market

After more than 30 years of development, the Chinese futures market has become quite large. According to the latest data from China Futures Association , as of the end of March this year, the margin scale of my country's futures market reached 1.29 trillion yuan, a year-on-year increase of 33.85% and a month-on-month increase of 2.53%. In the first three months of this year, the cumulative trading volume of the national futures market was 1.533 billion lots, with a cumulative trading volume of 128.61 trillion yuan, a year-on-year decrease of 17.07% and 9.02% respectively.

Industry insiders said that for many years, the futures industry has been hoping to issue a special and basic law aimed at clarifying the development direction of the futures market and clarifying the basic rules of the futures market. The issuance of the "Futures and Derivatives Law" this time meets the market's expectations. The review and approval of the Futures and Derivatives Law marks the further improvement of my country's capital market legislative system and the basic legal compliance of futures and derivatives market transactions, which means that investors finally have laws to follow in the process of safeguarding their own rights and interests.

Wang Yong, an advisor to Beijing Juxin Jinyuan Investment Company, told the China Times reporter that the Futures and Derivatives Law is the first legislation at the "legal" level 30 years after China reopened the futures market. It was previously departmental rules and rules, which is of historical significance. But this significance is not limited to the futures market. The Futures and Derivatives Law is more important in the capital market, including the stock market and the bond market.

Wang Yong said that a right can be an asset or a liability. However, what if this right is an asset or a liability cannot be determined? Should we use it as asset management or liability management ? This is an exposure right involving assets or liabilities. For example, holding stocks means a stock certificate that forces the operating profits of the stock issuing company. Like bonds, they are rights certificates.

"However, during the holding period, stocks and bonds are not settled or liquidated. Therefore, their value is uncertain. This requires the use of derivative contracts to determine the value of your assets or liabilities, and the derivatives financial contract is needed. Derivatives are such a financial agreement that separates physical assets from the value of this asset." Wang Yong said.

Wang Yong said that with such legal transactions in financial agreements, investment in the capital market will allow the rise and fall, and the value of its assets or liabilities will remain unchanged.After the implementation of the "Futures and Derivatives Law", it will help international capital enter the domestic capital market to engage in secondary market investment, making it a bottleneck in the construction of the capital market system. At the upper law, , and other laws, the cramped problems of the regulations themselves can be solved. Therefore, the Futures and Derivatives Law is a milestone for the futures market, but its significance to the capital market is far greater than its significance to the futures market.

In addition, the reporter found that one of the key points of this "Futures and Derivatives Law" is to highlight the protection of ordinary traders. It is understood that the Futures and Derivatives Law clarifies the concept of traders, and a special chapter stipulates futures traders, divides speculators and hedgeers, and accurately distinguishes them from investors in the securities market. Secondly, the relationship between traders and futures operating institutions is clarified, and traders are divided into professional traders and ordinary traders, laying the foundation for appropriateness management. Finally, it is clearly stipulated that trader-guaranteed funds should be established. Luo Xufeng, chairman of

Nanhua Futures , also said that one of the key points of the "Futures and Derivatives Law" is to highlight the protection of ordinary traders. Many highlights are made to protect traders. In addition to distinguishing between professional traders and ordinary traders, it is also necessary to clarify the rights of traders to know, inquiry, confidentiality, etc. It is prohibited to participate in futures trading venues, regulatory agencies and their staff, practitioners of futures business institutions and other special entities to prevent conflicts of interest.

"And it is also necessary to comprehensively and systematically stipulate that futures business institutions are prohibited from engaging in behavioral norms that harm the interests of traders; and establish a diversified dispute resolution mechanism for traders; at the same time, the current party commitment system in the futures field must be elevated to the law, and give full play to the advantages of the parties' commitment system to quickly and effectively compensate traders for losses. In addition, this law focuses on the provisions for traders to obtain civil compensation, and at the same time establishes supporting systems such as priority for civil compensation liability, inverting the burden of proof after disputes with futures business institutions, and establishing supporting systems such as trader protection funds." Luo Xufeng said.

The rules for futures are subject to new changes

China's futures market has become an important derivatives market in the world. Data from the China Futures Association shows that the cumulative trading volume and transaction volume of the entire market in 2021 both hit historical highs, with 7.514 billion lots and 581.20 trillion yuan respectively. The trading scale of commodity futures in my country has ranked first in the world for many years, and is the world's largest agricultural products, non-ferrous metals , coke, thermal coal and ferrous building materials futures market.

Deputy General Manager of Zhongda Futures Co., Ltd., Products, Jing Chuan, told the China Times reporter that the Futures and Derivatives Law clarifies qualification licenses and emphasizes franchise operations. The industry must continuously improve various systems, conduct business under the principles of openness, fairness and justice, and impose appropriate restrictions on access to the market to avoid financial and social risks.

"Further clarify the difference between swap contracts and forward contracts, avoid the chaos of futures trading in the name of local forward contract trading venues, manage swap contracts and forward contract transactions separately, clarify the margins. It is clarified that domestic, overseas and domestic and foreign cooperation are included in the scope of approval, supervision and management of futures regulatory agencies. Derivative trading is stipulated for the first time, the supervision of derivative transactions is clarified, the legal gap is filled, and the status of the derivative market is clarified." Jingchuan said.

According to data from the China Futures Association, as of the end of March 2022, there were 150 futures companies nationwide, distributed in 31 jurisdictions. In the first three months of this year, futures companies achieved a total operating income of 9.814 billion yuan, a year-on-year increase of 5.86%, of which the handling fee income was 6.904 billion yuan, accounting for 70.35%; a total net profit of 2.652 billion yuan, a year-on-year increase of 22.39%.

In the long run, the Futures and Derivatives Law will bring positive impact and huge development opportunities to futures industry operators. First, it will provide legal guarantees for innovation of futures listed products, and the types of futures options will be richer; second, it will further regulate the operation and service standards of futures operating institutions and futures related service institutions, improve risk control capabilities and customer service capabilities; third, it will promote the internationalization of my country's futures and derivatives market, accelerate the internationalization process, and enhance my country's voice in the pricing of commodities .

Wang Yong told the reporter of the China Times that for the compliant operation of different businesses of futures companies, the implementation of the Futures and Derivatives Law is like a firewall. No draft for the third trial has been seen yet. However, from the perspective of the passed part, the "Futures and Derivatives Law" defines the legal level of on-site futures contracts and over-the-counter derivatives contracts, which is very helpful to obtain a unified situation of "same essential requirements" but different understandings and different cognitions in various aspects.

Since there was no "Futures and Derivatives Law" before, the understanding of financial strategies in the same essence may have different understandings in terms of the formal requirements of the strategy, and the regulatory standards are very different due to differences in understanding. After the Futures and Derivatives Law clarifies the legal definition, it can confirm whether the business behavior is illegal from the essential requirements of the operation of financial institutions, and determine the compliance of the business development from the essential requirements of the combination of the business promotion strategy of financial institutions.

Wang Yong said that at present, the compliance requirements of futures companies in the industry are still in compliance with non-profit and loss-related "brokership business" level. For the OTC derivatives counterparty trading business, which is profit and loss, the static compliance of the counterparty trading is far from meeting the compliance of the mutual profit and loss counterparty trading. The "Futures and Derivatives Law" clearly defines the legal definition, which can prompt futures companies to break away from the compliance of their brokerage business in the off-site business development and achieve compliance with profit and loss business.

"For futures business institutions, the Futures and Derivatives Law stipulates basic rules. Futures business institutions have clarified their behavioral boundaries and legal basis. For example, there were various explanations and understandings for forced closing positions in the past. This law will include forced closing in this way, which will help clarify the behavioral boundaries of futures business institutions. For derivatives business institutions, this law clarifies the basic legal rules of derivatives for the first time, which will help financial institutions engage in derivative trading in accordance with the law." Wang Yong said.

Jing Chuan also said that the Futures and Derivatives Law regulates futures trading and derivatives trading, elevates the current futures-related systems into legal norms, incorporates derivatives trading into adjustment scope, and provides legal guarantees for the healthy development of the futures market and derivatives market. over-the-counter options has also changed from the past self-discipline to legal constraints. Its business development will be more standardized, which will inevitably play a positive role in preventing and resolving derivative risks, and the functions of over-the-counter options will also be exerted more deeply.