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[China Futures] Speed up futures legislation process, start a new journey for futures markets, serve to build a new development pattern

Fang submitted 2021-07-21 16:38:30
[China Futures] Speed up futures legislation process, start a new journey for futures markets, serve to build a new development pattern

Last year was the 30 year of the establishment of China's futures market. Over the past 30 years, the futures market has not forgotten the original intention of risk management, keeping in mind the mission of serving the real economy, and has passed through important historical stages such as start-up exploration, clean-up and rectification, standardized development and effective functioning. Today, the draft of the futures law has been reviewed for the first time by people.

On April 29, the Standing Committee of the National People's Congress announced the "Futures Law of the People's Republic of China (Draft)" open to solicit public opinions. The futures law is on the schedule to be posted.

The futures market is a rule-oriented market, and the construction of the rule of law is crucial. From the perspective of the development history of mature overseas markets, the development the futures market is the continuous improvement of futures laws and regulations.

The promulgation of a special law to regulate and adjust the development of the futures market is an important sign of the maturity of the futures market.

The draft futures law is not a simple upgrade to the "Regulations on Futures Trading Management". From the perspective of the draft and content design, it fully embodies the legislative thinking of "solidifying successful experience, eliminating development obstacles, strengthening top-level design, and reserving development space".

The draft clearly stated: The state supports the development of the futures market, establishes accounting, auditing, taxation, state-owned asset management, foreign exchange management and other systems that adapt to the characteristics of futures trading, facilitate the participation of natural persons, legal persons and unincorporated organizations, and promote the development of the futures market, and give full play to the futures market. The function of discovering prices, managing risks, and allocating resources; the state encourages the use of futures markets and other derivatives markets to engage in risk management activities such as hedging; the state takes measures to promote the development of agricultural futures markets and other derivatives markets, and guide the production and operation of domestic agricultural products.

The draft raises the development of the futures market to the national strategy level. It is not only a full affirmation of the development of the futures market, but also based on the new development stage, and puts forward new requirements for the construction of a new development pattern for futures market services. We have reason to believe that the futures law introduced after extensive consultation and further improvement will surely become a fundamental law that will stabilize the foundation, stabilize expectations, and benefit the long-term. In order to accelerate the construction of a domestic and international dual cycle, the new development pattern that promotes each other provides legal protection, so as to better promote China's futures market from "established" to "stronger", becoming a basic tool for increasing the influence of important commodity prices, and helping China’s future market gradually become a global commodity pricing center, risk management center and resource allocation center.

The draft futures law is a law that is in line with international standards and fully embodies Chinese characteristics. The draft embodies the ideas of unified legislation, unified supervision, and overall development of the futures market, and basically achieves the goals of futures market linkage, on- and off-market coordination, and domestic and overseas interoperability.

The scope of application of the draft futures law is wider than that of the "Administrative Regulations on Futures Trading", which clarifies the legal status of each market participant and the basic legal relationship of the futures market; from the legal level, arrangements are made for the opening of China’s futures market and cross-border supervision. Market opening up and cross-border supervision provide legal protection; mediation. Other systems have been introduced to strengthen the protection of investors; penalties for illegal acts have been greatly increased, and the legislative level encourages innovation and development and strengthens risk prevention and control. the content that futures companies are not allowed to engage in or engage in self-operating futures business in disguise is deleted, and the business scope of futures companies is expanded, and there are also opportunities for futures companies’ future business innovation in the future.

Before the promulgation of the futures law, we should actively participate in the improvement of the futures law. The author has the following suggestions for improvement in combination with his own work practice:

1. Handle the relationship between institutional supervision and functional supervision, and establish a futures and other derivatives supervision system with functional supervision and unified supervision as the goal

Institutional supervision and functional supervision are two supervision modes in the financial field, each with its own value and applicable fields. Institutional supervision means that all supervisory matters of a specific type of financial institution are under the unified responsibility of the supervisor of the corresponding institution, regardless of the financial business involved.

Functional supervision refers to supervision designed based on the basic functions of the financial system and the nature of financial products, regardless of the nature of such functions performed by institutions.

The current supervision of the financial industry is still based on institutional supervision, and this institutional supervision model is more suitable for the traditional separate business environment. However, with the gradual transformation of financial business from separate operation to mixed operation in recent years, the continuous cross-industry and cross-market business overlap has reduced the transparency of financial business, and the institutional supervision model has gradually exposed the prevention and control of mixed-industry financial risks. In the event of defects, the "oil treasure" incident is a representative example.

Therefore, with the development of the mixed-industry business environment, the financial supervision model needs to transform from institutional supervision to functional supervision.

Futures and other derivatives markets are characterized by strong professionalism and difficult supervision. In the future, various financial institutions will participate in futures and other derivatives market transactions in different ways, and provide comprehensive financial services for futures and other derivatives.

In order to prevent the occurrence of regulatory gaps, regulatory overlap, regulatory arbitrage, etc., it is recommended to take the promulgation of the Futures Law as an opportunity to build a functional regulatory model in the field of futures and other derivatives, and integrate futures and other derivatives-related businesses into the futures law standard and regulations. The scope of the adjustment is to conduct centralized and unified supervision of the same futures and other derivatives business under unified regulatory standards and rules to ensure the consistency of supervision. This is conducive to solving the problem of futures and other derivatives under the mixed business environment. The regulatory ownership of innovative businesses is also conducive to creating a fair competition environment and promoting the innovative development of financial markets. For this reason, it is recommended to adjust the relevant content of Article 7 of the Draft Futures Law.

2. Properly handle the relationship between forward-looking, top-level design and classification implementation, and gradual advancement, further expand the scope of business of futures companies, and reserve sufficient space for future development

Regarding the business scope of futures companies, it is not only the most concerned issue of the industry, but also the fundamental issue related to the spot capacity of futures services. Undoubtedly, the main contradiction in the current futures market is the contradiction between the huge demand for risk management from the rapid growth of the real economy and the lack of overall service capabilities in the futures industry.

Although there are many factors restricting the service capabilities of the futures industry, the current regulations on the scope of business of futures companies are one of the main factors.

Compared with mature markets, China's futures companies have a relatively narrow business scope and a relatively single business model, resulting in the futures industry showing multiple and weak characteristics and weak profitability, insufficient talents, weak service capabilities, and business differentiation. The restricted situation is not only incompatible with the development status of domestic and foreign capital markets, but also incompatible with the new development pattern of high-quality services.

At present, major changes unseen in a century in the world are accelerating and evolving. The impact of the new crown epidemic is far-reaching. The international political, economic and financial situation is becoming increasingly complex and changeable. Uncertainties are increasing. The price of commodities fluctuates sharply. The demand for enterprises to effectively control the risk of price fluctuations is much higher than ever. It is not only urgent but also extremely important to improve the ability of the futures industry to serve the real economy as soon as possible.

We should learn from the regulations on the business scope of futures operating institutions in mature overseas markets and the regulations on the business scope of securities companies in China’s Securities Law. Based on the huge demand for risk management services in the real economy and the basic functions of futures companies as financial institutions, we should scientifically define, and reasonably determine the business scope of futures companies, reserve space for futures companies to continuously improve their service capabilities and expand their service scopes, use legal system innovation to drive business innovation, and promote futures companies to shift from traditional brokers to risk management and wealth management. The transformation of a comprehensive derivatives service that integrates functions such as investment consulting and other functions.

Therefore, it is recommended that the provisions of Article 68 of the Draft Futures Law on the scope of business of futures companies be expanded. After approval, futures companies can engage in some or all of the following businesses: (1) Futures brokerage, including commodity futures brokerage and financial futures Brokerage, overseas futures brokerage; (2) Futures investment consulting; (3) Futures trading consultant; (4) Asset management; (5) Financial product sales; (6) Intermediary introduction; (7) Futures margin financing; (8) Futures Proprietary operation; (9) Futures market-making transactions; (10) Other derivatives transactions; (11) Futures settlement; (12) Other futures businesses approved by the futures regulatory agency of the State Council.

Regarding the business scope of futures companies, in legislation, it is necessary to highlight forward-looking planning and strengthen top-level design. The business scope should be as wide as possible; in the specific implementation process, it can be combined with the needs of the real economy, as well as the capital strength and professional capabilities of the futures company. It also should have compliance and risk control capabilities, strictly set permit conditions, categorize permits, strictly control access, and strengthen supervision during and after the event, avoid risks arising from the full liberalization of the business scope of futures companies in the short term. In the business licensing stage, it should be implemented step by step and steadily advance, so as to eliminate the concerns of all parties in the society about the relaxation of the business scope of futures companies.

3. Handle the relationship between strict supervision and prevention of risks and the implementation of the "three new" requirements for development, and eliminate the problems left over during the period of clean-up and rectification of the futures market

At present, China has turned to a stage of high-quality economic and social development. The futures market will usher in a critical period of transition from accumulation of quantity to improvement of quality. Vigorously developing the futures market has many advantages and conditions, but at the same time, all parties in society face insufficient, incomplete, in-depth, and objective issues in understanding the function of futures. The problems left over from the clean-up and rectification of the futures market in the 1990s still exist in some places.

Futures legislation, while strengthening strict supervision and preventing risks, we must accurately grasp the essence of the "three news", implement the requirements of the "three news", we should have a deep understanding of the new development stage, fully implement the new development concept, and strive to build a new development pattern.

For this reason, it is recommended to delete the statement in Article 29 of the Draft Futures Law that "no unit or individual may use credit funds or fiscal funds to conduct futures transactions in violation of regulations."

Because the illegal use of credit funds and fiscal funds to engage in "any transactions" should be prohibited. The use of credit funds and fiscal funds should be regulated by corresponding specific regulations or regulatory documents, and there is no need to go up to legal requirements and write them into the futures law.

Once written into the Futures Law, problems such as misunderstanding, misinterpretation, and misuse are prone to occur in practice, resulting in the inability of credit funds and fiscal funds to participate in futures transactions.

It needs to be further clarified that the use of credit funds for spot production and operations of enterprises and at the same time for hedging will make business operations more stable and credit funds will be safer. The "insurance + futures" model involving fiscal funds has played an important role in serving the country's poverty alleviation strategy. In the future, more fiscal funds and similar funds will participate in the "insurance + futures" model to help the country's rural revitalization strategy.

It is foreseeable that in the future, credit funds will be used for hedging to stabilize business operations, and that financial funds will participate in the "insurance + futures" service for rural revitalization. This should be actively supported and become the norm.

4. Handle the relationship between financial service providers and financial consumers, and on the basis of strengthening the fiduciary obligations of financial institutions, clarify the rights and obligations of the two civil entities based on equality, and protect the legitimate rights and interests of both parties in accordance with the law

The draft futures law has significantly strengthened the protection of futures traders by strengthening the investor suitability management system, distinguishing between ordinary traders and professional traders, introducing a mediation system, the class action representative system, and the inversion system of the burden of proof have significantly strengthened the protection of futures traders, which is a highlight of the futures legislation.

The above-mentioned institutional arrangements are basically in line with the current investor structure of China's futures market. At present, China's futures market is a market with a relatively high number of small and medium retail investors, and this state may continue for a long time. Therefore, strengthening investor protection, especially the protection of small and medium investors is important.

But at the same time, the basic legal relationship between financial institutions and futures traders needs to be handled well in the legislation, which is the relationship between equal civil subjects. For this reason, it is recommended to clarify the basic obligations of financial consumers on the basis of emphasizing the fiduciary duty and appropriateness duty of financial institutions, and protect the legal rights and rational behavior of financial consumers in a reasonable manner in accordance with the law, so as to avoid excessive protection that affects financial consumers due to the fundamental protection and long-term protection.

Because excessive improper protection will objectively cause the weakening of financial consumers' risk identification and risk prevention capabilities, and excessive protection will also trigger irrational rights protection behaviors, affecting social order and financial stability. In addition, the unrestricted "reversal of the burden of proof" may make many financial institutions annoyed to provide evidence and fear responsibility, thereby reducing the active service behavior of some small and medium traders, and ultimately backfired. Therefore, it is recommended to subdivide the applicable circumstances of the inversion of the burden of proof and appropriately limit the conditions and circumstances of the inversion of the burden of proof.

5. Handle the relationship between administrative and civil liabilities, and deal with futures companies’ violations of regulations and compensation for customer losses in accordance with the law

Several clauses of the draft futures law emphasize that futures companies must bear the responsibility of compensation for customer losses in violation of regulations. Futures companies are financial institutions and should accept financial supervision. They should be punished due to violations and bear administrative responsibilities, including regulatory measures and administrative penalties taken by the supervised department.

Whether a futures company’s violation should be a reason for compensating customers’ losses requires objective analysis and case studies. In practice, the situation is more complicated. The key is to see whether there is a direct causal relationship (rather than a vague causal relationship) between the violation and the customer’s loss. Indirect causation etc.), as well as the impact of the faults of both parties, the parties at fault each bear the responsibilities corresponding to their mistakes.

In practice, although the futures company has violated the regulations, if the behavior is not the direct cause of the customer's loss, the futures company only bears administrative responsibility and accepts corresponding penalties from the regulatory authorities, and should not bear civil liability for compensation.

There are many reasons for the loss of customers participating in futures trading. Whether the customer has any fault, the magnitude of the fault, whether the futures company needs to bear the liability for compensation and the specific proportion that should be borne, can be resolved through civil litigation procedures, and the futures company can be determined through civil procedures. It’s inappropriate to confuse administrative liability with civil liability.

6. Handle the relationship between administrative supervision and self-discipline management, and further strengthen and enrich the functions of futures industry associations

In the ternary governance structure of "administration, self-discipline, and market", the self-discipline mechanism has become an important and irreplaceable part due to its characteristics of moral restraint and flexible management.

In recent years, the China Futures Industry Association has closely focused on the fundamental purpose of serving the national strategy and real economy in the futures market, Give full play to the functions of self-discipline, service, and conduction, educate and organize members and practitioners to comply with laws and regulations, carry out integrity building, perform social responsibilities, safeguard the legitimate rights and interests of investors, formulate and implement industry standards and business norms. It has also played an active and important role in promoting the innovation and development of the industry and mediating futures disputes, which has effectively promoted the development of the futures industry and the function of the futures market.

Judging from the content of the draft futures law, the regulations on the responsibilities of the interim cooperation are relatively complete, but compared with the functions of self-regulatory organizations in mature overseas markets, there is still room for further strengthening and enrichment. It is proposed to increase the arbitration function of on the basis of consolidating the existing functions through legislation.

Arbitration has the advantages of procedural flexibility, professional authority, confidentiality of non-public hearings, and quickness of a final decision.

Disputes in the futures industry have the characteristics of strong professionalism and complex cases. The characteristics of disputes in the futures industry objectively have an inherent demand for professional arbitration institutions.

In recent years, China Futures Association has played a huge role in mediating disputes between members and customers, between members and members, and between customers and customers, and has accumulated rich experience in mediating futures disputes.

At the same time, in the process of performing self-discipline management responsibilities, China Futures Association has accumulated a wealth of futures expert resources, and it is relatively easy to establish a professional and authoritative arbitrator expert database, laying a professional foundation and human resources for professional, fair and efficient arbitration work.

In view of this, it is recommended to increase arbitration function in the field of futures and derivatives, give full play to the professional advantages of self-regulatory organizations in resolving conflicts and mediating disputes, promote diversified co-governance, and promote the healthy development of the futures industry.

8. Handle the relationship between the supervision of the spot market and the supervision of the futures market, and strengthen the supervision coordination and supervisory linkage of the spot market.

In recent years, the supervision of China's futures market has been continuously strengthened, and the ability of futures exchanges and futures companies to monitor abnormal transactions has been continuously improved. It is becoming more and more difficult to directly manipulate prices through the futures market.

However, due to the high correlation between the futures price and the spot price, the futures price theoretically reflects the forward price of the spot, and the delivery guarantees the forced convergence of the futures price to the spot price.

When it becomes more difficult to manipulate futures prices, some unscrupulous institutions or individuals will often interfere with spot prices by taking advantage of capital and monopoly in the spot market, or using improper means such as hoarding, spreading false information, and driving up prices, thereby affecting futures prices.

The reasonableness of commodity prices is related to the stable operation of the economy and household consumption. The State Council executive meeting held on May 19 clearly pointed out that we must attach great importance to the adverse effects of rising commodity prices, restrict unreasonable price increases, and strive to prevent resident consumption transmission.

Judging from the content of the draft futures law, the draft regulations on the division of labor and coordination of the futures market supervision are relatively clear, but it does not provide for the coordinated supervision and linkage supervision between the futures and spot markets. There is insufficient legal support for the administrative supervision cooperation between the management departments and the self-discipline management cooperation between the futures self-regulatory organizations and the relevant spot self-regulatory organizations.

Therefore, it is recommended to add a special chapter "Inter-departmental supervision and collaboration" to clarify that all relevant administrative departments and relevant self-regulatory organizations involved in the commodity futures market and the spot market should establish a cross-departmental and cross-industry collaborative supervision mechanism, information sharing mechanism and joint anti-illegal mechanism to form a combined force of supervision to severely crack down on the manipulation of spot prices and futures prices,

Effectively prevent the adverse effects of irrational spot prices on futures prices and the improper guidance of irrational futures prices on spot prices, and jointly maintain the healthy development of the bulk commodity market.

【中国期货】加快期货立法 开启期市新征程 服务构建新发展格局











A. 处理好机构监管和功能监管之间的关系,建立以功能监管、统一监管为目标的期货及其他衍生品监管体系







B. 处理好前瞻性、顶层性设计与分类实施、逐步推进的关系,进一步扩大期货公司业务范围,为未来发展预留充足空间








C. 处理好从严监管防风险与贯彻“三新”要求谋发展之间的关系,消除在期货市场清理整顿时期遗留的印记








D. 处理好金融服务提供者与金融消费者之间的关系,在强化金融机构信义义务的基础上,厘清两者基于平等民事主体之间的权利与义务,依法保护双方的合法权益





E. 处理好行政责任与民事责任的关系,依法处理期货公司违规行为与客户损失赔偿问题





F. 处理好行政监管与自律管理之间的关系,进一步强化和丰富期货业协会的职能









G. 处理好现货市场监管与期货市场监管之间的关系,加强期现货市场的监管协同和监管联动








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