Derivative Financial Instruments, Legal Research

Derivatives market, as the measure to manage financial risk, functioning as a efficient means to keep financial system in sound steadiness and promote the development of the financial system, has been a indispensable part of a complete and well-developed modern financial system. Derivatives products not only have lots of economic function in financial operation, but also contain various risks in themselves. Moreover, the risks maybe out of control in some cases due to the influence of the operation of derivatives market, and bring tremendous damages to finance. And resolving the risks of derivatives market, keeping financial system in good operation, has been the main theme in the development of derivatives, which has also challenged the financial legislation. Legislation should be made to make derivatives prosperity reasonable. From 1990's to now, many counties attach importance to legislation in derivatives, but it is still lots of things to do in this area. It is very important to regulate the derivatives activities by the proper regulation manners and the suitable legislatives scheme to promote the development of the derivatives activities, to enhance the protection of the end-users and dealers, and to maintain the whole welfare of the society. This article is focus on the derivatives, and tries to give a deep research on the definition of derivatives ,the function of derivatives activities ,the legislative affairs of non-standard contract of derivatives, the problems of the end-user in legislation and law suit, the legal problems of the dealer ,and the regulation or supervision of derivatives.This article can be divided into six chapters . Chapter 1 is the study on definition of derivatives. Because correct definition of derivatives is the basic step of the study on derivatives, the article pay much attention to the definition of derivatives products , the legal attribute of derivatives products , and the fundamental features of derivatives products. The article redefines the derivatives products, clears which kind of legislation will be suit to derivatives products , and finds out the special problems of derivatives and how to regulatethem. The article hope such kind of study can bring right concept to set up legislation on derivatives.Chapter 2 is a study on the basic problems of Derivatives products. There are thousands of derivatives products in the market, but it maybe possible to abstract some basic problems from all of them. The article ties to analyze the basic products in the market , find out the basic economic function of derivatives products , describes the frame of the market .and studies the rationality and the worthiness of developing derivatives . The article makes a conclude that we should set up the market of derivatives products step by step according to situation of our county on the basis of thorough study on derivatives products development in China.Chapter 3 is the legal problems of the non-standard derivatives contract. Because the OTC derivatives activities are short of regulation compared with the derivatives activities in the exchange, for example ,there is no margin needs as is it in the futures exchange, the legislation on the contract of OTC derivatives is the basic legal measure to protect the interests of the counter-parties .Among the global financial organizations , International Swap and Derivatives Association , known as ISDA, is the largest global financial trade association, by number of member firms. Having approximate 700 member institutions from 50 countries on six continents, which include most of the world's major institutions on OTC derivatives, ISDA has developed the ISDA Master Agreement, used by most of the members over the world. In this chapter ,the article introduces the history of ISDA, the mission of ISDA, the 1987 /1992/2002 master agreement , especially the content of the 2002 master agreement ,and analyzes the legal features of the OTC derivatives contract.Chapter 4 is the study on end-user legal problems. The end-user is one of the counter-parties of OTC derivatives dealings, and also the one who will suffer from the big lost of the failure in OTC derivatives activities. Properly designing the end-user's right-dutysystem in legislation , finding right way to balance the interests of dealer and the end-user, will do good to the development of the OTC derivatives. In this chapter , the article analyzes the definition and the function of OTC derivatives end-user in the first , then collect the typical cases of end-user, analyzes the main points of the legal problems of end-user, and at last the article gives the suitable legislative recommendations to OTC derivatives activities in our country.Chapter 5 is the study on legal problems of the dealer .The problems of dealer is closely related to the one of end-user, they are the two main factors in the same system with opposite interests. In this chapter, the article analyzes the contradictions between the dealer and end-user at the first ,and then collect the main cases about dealer in OTC derivatives activities .After analyzing the main legal features of dealer on the bases of analyzing main cases , the article tries to find out the civil duty of dealer ,the proper regulation of dealer , and at last gives the recommendations on legislation of dealer , especially to the legislative system of our country according to the practice of legislation in our country.Chapter 6 is the study on OTC derivatives regulation. Because the OTC derivatives has different operation rules compared with the inside exchange, the regulation of OTC derivatives should be a different one .In order to analyze the key points of the regulation of OTC derivatives, the article collects the controversy on the regulation of OTC derivatives , tries to find out the main contradictions of the OTC derivatives activities , and analyzes the economic function of OTC derivatives, and then gives a overview of the legislation of USA, Australia , Britain and Canada. At last, the article analyzes legislation of these four countries and the practice of legislation in our country , and then gives the legislative recommendations to our country.