A Study On Legal Issues Of International Financial Derivatives

Financial innovation in the last century lead to a lot of new financial derivative products and restructure the old international capital market and its underlying legal system. The law of derivatives in not, from the legal point of law, a coherent topic. Legal analysis and study is traditionally divided into contract, tort, equity and trusts, corporate law and so on which belong to private law area. The aim of this book is try to provide a basic system of public law area which may might relevant to derivatives. Since the international financial derivatives is so comprehensive and still on developing, my effort is focus on several topics which cover the existing international derivatives legal system, the derivatives exchange, the derivative trading intermediaries, the clients protection, the OTC derivative market, the risk control system. As a market supervisor worked in Shanghai Stock Exchange and experienced the crazy T-bond futures trading in 1994 to 1995, I try to analyze the failure reason on China financial futures market and give some suggestions on the resume of government bonds future market and the need for a central financial regulator in China. The book hence divided into 8 chapters.Chapter 1 is the basic introduction of financial derivatives. Firstly I try to give a clear idea of financial derivatives based on commercial and legal analysis. Although the derivatives can be dividend into four catalogues in general which are forwards, futures, options and swaps, I also mentioned some new form of derivative including credit derivatives. Secondly I gave a brief introduction of historical development on derivatives market and a analysis on the capacity to enter into derivatives transactions and speculation, hedging, arbitrage and asset liability management reasons. Thirdly I focus on the legal nature of a derivatives contract, such as is it a gaming and wagering activity and other interests in a derivatives contract.Chapter 2 is the analysis on international legal system on financial derivatives. Financial innovation from 1960s have changed the traditional domestic legal system and the old international monetary and financial legal mechanism, it also lead a reform on the financial regulatory system on a lot of developed countries. In this chapter, I focus on the development and evolvements of some developed legal areas and international organizations related to the derivatives products. The result of this research is my conclusion on five characters of financial derivatives legal system.Chapter 3 is the some legal problem on derivative exchange and new demutrualizion reform and its effects on those exchanges. As a successful market, those are some requirements on the establishment, market management and surveillance of the derivative exchange. Another big issue is the for-profit company oriented reform on those traditional non-profit market. According to the document issued by IOSCO, I analyzed three main legal issues related to this new trend. Chapter 4 cover the legal issues related to derivative trading intermediaries. Since the derivatives is a brand new business for many companies, it is should be stipulated some basic requirements for the participants of this market. Fortunately, a lot of commodity future exchanges already set a legal regulatory mechanism on its members and other organizations. The most important requirement for derivative trading is the transparent requirement on its activities and account standards.Chapter 5 concern to the question of clients protection. Risk is inherent in finance, the risk involved in financial derivatives is much greater than the traditional financial business. Apart form the clients protection standards of exchanges market, many countries think to increase a higher requirement for clients who need confidence on the whole financial market. A good example is to set up client compensation system.Chapter 6 relate to the most uncertainty area of financial derivative which is over-the-counter market. In this Chapter I first look to the...