Legal Research On The Supervision And Management Of Financial Futures Market

In the 1980s, Kansas City Board of Trade took the lead inintroducing stock index futures which became the latest created butfastest growing financial futures products. As a mature riskmanagement tool of in the international capital market, stock indexfutures enjoy higher level of liquidity and time efficiency.With the trend of economic globalization and financialliberalization, many countries are taking great efforts to developstock index futures in order to obtain financial asset pricingauthority, safeguard national financial safety and strengthen theircompetitiveness in the international financial market. A fullyimproved financial futures market is a necessity for the developmentof Chinese capital market."Stock index futures are a double-edgedsword". Failure of several famous financial institutions in thisarea including Bahrain bank, Long Term Capital Management Fund,Chinese Wanguo Securities Company, Daiwa Bank and Societe GeneraleBank uncovered limitation and deficiency in relation to supervisionand management system of financial futures market. The fact thatfinancial futures risk events frequently occur all over the world is requiring the governments to take legal supervision and management asthe most effective supervision and management measures for adjustmentof financial futures market.The subject of this thesis is enlightened by series of financialfutures risk events occurring domestically and all over the world andit is also set against the background that stock index futures areabout to be introduced into China. This thesis will focuses on how toestablish supervision and management system in the Chinese financialfutures market from the legal perspective. As governmental influencehas been everywhere since Chinese financial futures market isestablished, the highest target of financial futures supervision andmanagement system is to achieve a system composed of governmentregulation and industry self-discipline, among which the key tosuccess is to ensure dynamic balance between government regulationand industry self-discipline and serious punishment of illegal andirregular activities so that the legal interests of minorityinvestors in the futures market will be safeguarded to the largestextent.Chapter One Theoretical Basis of Supervision and Management ofFutures Market. This chapter explains, from the perspective offinancial supervision and management as well as consideringcharacteristics of financial futures market, market failure theory insupervision and management of futures market, public benefit theory,functional supervision and management theoryChapter Two Civil Legal Relationship of Financial Futures.This thesis analyzes the features of civil legal relationships offinancial futures including equality, bilateral contract, contractwith consideration, legal enforcement, varieties of legalrelationship, relativity and specialization of parties to the transaction, specialization of subject of the transaction, subject todirect supervision and management by state supervision and managementauthorities, etc.ï¼›questions the nature of legal person of financialexchange and points out the characteristics of self-regulation. Basedon discussion of legal relationship between futures companies andinvestors, the writer believes that the futures activities of futurescompanies are of broker nature. In particular the thesis demonstratesthat the object of stock index futures transaction is stock indexfutures contracts.Chapter Three A Comparative Study of Supervision andManagement Systems of Overseas Stock Index Futures Markets. Thischapter firstly explains that the model of supervision and managementof U.S. futures market is a model of segmentation and cooperationï¼›secondly it discusses about the special system of centralizedmanagement by three specialized departments in Japanï¼›then it reviewsthe characteristics of combination of self-regulation and commercialinterests in Hong Kongï¼›lastly it introduces high level of selfregulationin U.K. At the end of this chapter, the writer providesproper appraisal in relation to different supervision and managementmodels and summarizes the features of the above markets as follows:The three-level management system of U.S. futures market is wellorderedas well as flexibleï¼›the centralized management by threespecialized departments in Japan is highly uniqueï¼›the moderateinterfere from Hong Kong Government is reasonable modification offinancial liberationï¼›and the U.K. futures market shows high level ofself-regulation.Chapter four The operation mode and legal supervision andcontrol of the stock index. This chapter has introduced three kindsof modes of the listing place of the global stock index futures: listed on futures exchange; trading on both stock exchange andfutures exchange; established financial futures exchange especially.Then this chapter has analyzed the necessity of the designation ofthe listing place of China stock index futures to the futuresexchange. Afterward has explained the relevant system is necessaryfor the stock index futures. In order to set up a coordinatingmechanism of across-market supervision, the following aspects arerequired: calling across-market supervisory organization into play;setting up the broken circuit mechanism of stocks; improving theinformation announcing system; starting the mechanism of common riskcontrol and joint investigation; improving the anti-manipulationsystem. After describing exhaustively the legitimacy, late cominginterests and innovative principle of market of the stock indexfutures legislation, this chapter has offered concrete legislativeproposals on expanding the goods epitaxy, constructing the futureslaw frame, cultivating stock index futures investors, confirming netsettlement system legally, entitling trading rules of futuresexchange a legal effect.Chapter five Construction of legal system frame of China stockindex futures supervision. Firstly this chapter has analyzed that inthe stock index futures multi-level supervisory system, how toconstruct the regulatory organization , upgrade the management idea,and accelerate the market-based process. Secondly, this chapter hasgiven suggestions for improving the supervision of the exchange byanalyzing the legal nature and system of exchange, self-regulatoryfunction, administration structure, coordination of public interestsand commercial interest, etc. Finally, this chapter has explained howto ensure the financial futures market self-regulatory system sound.For example, strengthen the independence of the association of futures industry, divide rationally the functions and powers of selfregulatoryorganization, strengthen the functions and powers ofassociation of futures industry to member's daily supervision, enablethe futures company to meet the requirement of financial enterprise,etc.Chapter six Risk control system of the stock index future.Firstly, this chapter has introduced the legal characteristic of thestock index futures. Secondly, pointed out that general risks andspecial risks of the stock index futures. Thirdly, this chapter hasdesigned the core frame of the risk supervisory system of theexchange: market subject access system, margin system, price limitsystem, position limit system, large trader report system, dailysettlement system, multi-tiered clearing system, security depositsystem, cash delivery system, audit system, and risk reserve fundsystem. Finally, this chapter has emphasized the importance of marketrisk management by summarizing the deficiency in supervising duty,trading rules, system, disclosure of information, etc. in the"3.27national debt futures affairs".Chapter seven The Legal supervision and management to protectthe futures investors. This chapter has focused on the protection forthe futures investors, and studied the legal supervisory system. Byshowing the necessity of protection for futures investors, thischapter has analyzed the legal system of our country on this subject.Then, in order to punish the unlawful practice and protect investor'slegitimate rights and interests, this chapter had defined theunlawful practices, such as inside trade of futures, rigging market,swindling customers, etc. After explaining the current situation ofthe present legal structure, this chapter has put forward thepertinent suggestions on different illegal activities. Finally, this chapter has analyzed critically China legal system of security fundfor futures investors. The current security fund is initiative,compensatory and relieving. It has such defects: the corporatizationinstitutional framework has not been established; the protectionyardstick of the fund is hard to hold; it is lack of operationalclaims settlement procedure and claims settlement expectancy. It isnecessary to set up following multiple systems to push forward theconstruction of the security funds related system for futuresinvestors: establishing corporatization security fund operation mode;enactment and implementation of Regulation on Futures InvestorProtection; introducing group lawsuit system; strengthening educationon investors; establishing education fund for investors, etc.