People’s Republic of China (PRC) Futures and Derivatives Law (2)
Section 2 Futures Trading
Article 17 The listing of futures contract varieties and standardized option contract varieties shall conform to the provisions of the futures regulatory agency of the State Council, and shall be reported by the futures trading place to the futures regulatory agency of the State Council for registration according to law.
The suspension, resumption and termination of listing of futures contract varieties and standardized option contract varieties shall comply with the provisions of the State Council futures regulatory agency, which shall be decided by the futures trading place and filed with the State Council futures regulatory agency.
The varieties of futures contracts and standardized option contracts should have economic value, and the contracts are not easy to be manipulated, which is in line with social and public interests.
Article 18 Futures trading shall be conducted with real-name registration system account. Traders who conduct futures trading shall hold legal documents to prove their identity and apply for opening an account in their own name.
No unit or individual may, in violation of regulations, lend its own futures account or borrow someone else’s futures account to engage in futures trading.
Article 19 Anyone who conducts futures trading in a futures exchange shall be a member of the futures exchange or other participants who meet the requirements of the futures regulatory authority of the State Council.
Article 20 Where a trader entrusts a futures trading institution to conduct trading, he may issue trading instructions in writing, by telephone, through self-service terminals, or through the Internet. Trading instructions should be clear, specific and comprehensive.
Article 21 Where a computer program automatically generates or issues trading orders to conduct programmed trading, it shall comply with the provisions of the the State Council Futures Regulatory Authority and report to the futures trading place, and shall not affect the system security or normal trading order of the futures trading place.
Article 22 A margin system shall be implemented in futures trading, and the futures clearing institution shall collect the margin from the clearing participants, and the clearing participants shall collect the margin from the traders. The deposit is used for settlement and performance guarantee.
The forms of margin include cash, treasury bonds, stocks, fund shares, standard warehouse receipts and other highly liquid securities, as well as other properties stipulated by the the State Council Futures Regulatory Authority. Where securities are used as the security deposit, it can be carried out by pledge and other means with performance guarantee function according to law.
The form and proportion of the deposits collected by futures settlement institutions and settlement participants shall conform to the provisions of the State Council futures regulatory agency.
Where a trader trades in a standardized option contract, the seller shall pay the deposit and the buyer shall pay the royalty.
The royalties mentioned in the preceding paragraph refer to the funds paid by the buyer for purchasing standardized option contracts.
Twenty-third futures trading shall implement the position limit system to prevent the risk of excessive concentration of contract positions.
Those who engage in risk management activities such as hedging may apply for position limit exemption.
Measures for the management of position limits and hedging shall be formulated by the the State Council Futures Regulatory Authority.
Twenty-fourth futures trading shall implement the management system of filing the actual control relationship of traders. Traders shall, in accordance with the provisions of the the State Council futures regulatory authority, report the actual control relationship to the futures operating institutions or futures trading places.
Twenty-fifth futures trading fees should be reasonable, and the charging items, charging standards and management measures should be made public.
Article 26 Transactions conducted in accordance with the business rules formulated by the futures exchange according to law shall not change the trading results, except as provided for in the second paragraph of Article 89 of this Law.
Twenty-seventh members and traders of futures trading places shall, in accordance with the provisions of the futures regulatory authority of the State Council, report on major matters such as trading, positions and deposits.
Article 28 No unit or individual may illegally use credit funds or financial funds for futures trading.
Twenty-ninth futures trading institutions, futures trading places, futures settlement institutions, futures service institutions and other institutions and their employees shall report to the the State Council futures regulatory agency in a timely manner on the prohibited trading behaviors found.
Section 3 Derivatives Trading
Article 30 A legally established place may organize derivatives trading upon examination and approval by the department authorized by the State Council or the futures regulatory agency of the State Council.
The trading rules formulated by the place where derivatives trading is organized shall fairly protect the legitimate rights and interests of all parties involved in the transaction and guard against market risks, and shall be submitted to the department authorized by the State Council or the futures regulatory agency of the State Council for approval.
Thirty-first financial institutions to carry out derivatives trading business, should be approved or approved according to law, fulfill the obligations of traders’ appropriateness management, and should abide by the relevant state supervision and management regulations.
Article 32 Where the derivative transactions are conducted in the form of master agreement, the master agreement, all supplementary agreements under the master agreement and the agreements made by both parties to the transaction together constitute a complete and single agreement between the two parties to the transaction, which is legally binding.
Article 33 The model contracts such as the master agreement specified in Article 32 of this Law shall be submitted for the record in accordance with the provisions of the department authorized by the State Council or the futures regulatory agency of the State Council.
Article 34 When conducting derivative transactions, performance guarantee can be provided by means of pledge according to law.
Article 35 Where derivatives are traded by means of master agreement according to law, in case of agreed circumstances, the transaction may be terminated in accordance with the agreement, and all trading profits and losses under the agreement shall be settled on a net basis.
The net settlement conducted in accordance with the provisions of the preceding paragraph shall not be suspended, invalid or revoked because any party to the transaction enters bankruptcy proceedings according to law.
Article 36 The department authorized by the State Council and the the State Council futures regulatory agency shall establish a report database for derivatives transactions, collect, save, analyze and manage information such as the subject matter, scale and counterparty of derivatives transactions in a centralized way, and disclose relevant information to the market in a timely manner in accordance with regulations. The specific measures shall be formulated by the departments authorized by the State Council and the futures regulatory agency of the State Council.
Article 37 Where a department authorized by the State Council or a clearing institution approved by the State Council Futures Regulatory Authority acts as a central counterparty for centralized settlement of derivatives transactions, it may carry out net settlement according to law; Settlement property shall be given priority for settlement and delivery, and shall not be sealed up, frozen, detained or enforced; Before the settlement and delivery are completed, no one may use it.
Centralized settlement conducted according to law shall not be suspended, invalid or revoked because any party involved in settlement enters bankruptcy proceedings according to law.
Article 38 Specific measures for regulating, supervising and managing derivatives trading and related activities shall be formulated by the State Council in accordance with the principles of this Law.
Chapter III Futures Settlement and Delivery
Thirty-ninth futures trading shall implement the debt-free settlement system on the same day. At the time specified in the futures trading place, the futures settlement institution shall settle the settlement participants at the settlement price on the same day; The clearing participants shall settle the traders according to the settlement results of the futures clearing institutions. The settlement result shall be promptly notified to the settlement participants and traders on the same day.
Article 40 The deposits and royalties collected by futures clearing institutions and clearing participants shall be separated from their own funds, and shall be deposited in the special account of futures deposit depository institutions in accordance with the regulations of the State Council Futures Regulatory Authority, and managed separately, and illegal misappropriation is prohibited.
Article 41 If the margin of a clearing participant does not meet the standards stipulated in the business rules of the futures clearing institution, the futures clearing institution shall notify the clearing participant to add the margin or close the position by itself within the specified time. If the clearing participants fail to add margin or close their positions by themselves within the specified time, they shall notify the futures trading place to forcibly close their positions.
If the trader’s margin does not meet the agreed standards between the clearing participants and the traders, the clearing participants shall notify the traders to add margin or close their positions themselves within the agreed time; Traders who fail to add margin or close their positions by themselves within the agreed time shall be forced to close their positions according to the agreement.
Where securities are used as security deposits and futures clearing institutions and clearing participants forcibly close their positions in accordance with the provisions of the preceding two paragraphs, they may dispose of securities, etc.
Article 42 If a settlement participant breaches the contract during the settlement process, the futures settlement institution shall use the deposit and settlement guarantee of the settlement participant, the risk reserve and its own funds of the settlement institution to complete the settlement according to the business rules; Where a futures settlement institution completes the settlement with its risk reserve and its own funds, it may claim compensation from the settlement participant according to law.
If a trader breaches the contract in the settlement process, the settlement participant entrusted by him shall use the margin of the trader, the risk reserve of the settlement participant and his own funds to complete the settlement in accordance with the contract; If a settlement participant completes the settlement with his risk reserve and his own funds, he may claim compensation from the trader according to law.
The term "settlement guarantee" as mentioned in this Law refers to the funds paid by the settlement participants to the futures settlement institutions with their own funds to guarantee performance.
Article 43 The assets collected and withdrawn by a futures settlement institution in accordance with its business rules, such as margin, royalty, settlement guarantee, risk reserve, etc., shall be given priority for settlement and delivery, and shall not be sealed up, frozen, detained or enforced.
Before the settlement and delivery are completed, no one may use the deposit used to guarantee the performance and delivery, or the delivery property entering the delivery link.
Settlement and delivery conducted according to law shall not be suspended, invalid or revoked because any party involved in settlement enters bankruptcy proceedings according to law.
Article 44 When a futures contract expires, the trader shall settle the expired open contract through physical delivery or cash delivery.
At the time stipulated in the standardized option contract, the buyer of the contract has the right to buy or sell the subject matter at the agreed price, or settle the cash difference according to the agreement, and the seller of the contract shall perform the corresponding obligations according to the agreement. The exercise of standardized option contracts shall be organized by futures settlement institutions.
Article 45 Where a futures contract is delivered in kind, the futures settlement institution shall be responsible for organizing the delivery of the payment for goods, standard warehouse receipts and other rights certificates of the subject matter of the contract.
If the futures contract is delivered in cash, the futures settlement institution shall, on the basis of the delivery settlement price, transfer the profit and loss of both positions.
The standard warehouse receipt mentioned in this Law refers to the standardized delivery certificate issued by the delivery warehouse and registered by the futures trading place. (To be continued)
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