Study On Regulation Of Derivative Financial Instruments In China

Derivative financial instruments which are the high-end products deriving from the perfection of financial system and the diversification of common financial markets. Since 1970s, derivative financial instruments have made unprecedented progress along with the finance liberalization, the loose finance regulation policies, and information technology upgrade.The lack of regulation not only impedes the positive effect of derivative financial instruments but also can’t effectively restrains their negative effect, which leads to the increase of systemic risk and global finance instability. A series of events, for example, Long-term Capital Management crisis, Barings Bank collapse, US subprime crisis and so on, impels us to strengthen regulation .China derivative financial instruments market is in primary stage. Study on the derivative financial instruments regulation system plays an extremely important role in protecting China finance safety and advancing China finance’s strategic position in global market.The paper is composed of three parts, that are introduction, main body and conclusion.The first part is the introduction, includes reasons for topic selection, literature review, study methods, etc.The second part is the paper’s main body which comprises six chapters:The first chapter is the general introduction on the derivative financial instruments and their market, including the definition, classification, functions and effects of the derivative financial instruments, the sketch on derivative financial instruments global market, and the introduction on the derivative financial instruments market in America, England and Japan.The second chapter is study on the risk and regulation of derivative financial instruments. I analyze six kinds of risk on the derivative financial instruments. According to the introduction and the analysis on regulation systems from governments, exchanges, futures limited, and investors’aspects, the risk management system for derivative financial instruments is designed. I also introduce three cases, including Shanghai Stock Exchange warrant-setting crisis, Hong Kong CITIC Pacific deficit and America financial risk, and get some enlightenment.The third chapter is the comparison on the derivative financial instruments regulation systems. According to the departments and scope for regulation, the regulation systems for derivative financial instruments market in America, England and Japan are introduced in details. Based on in-depth analysis on relevant governmental organizations, self-discipline organizations in these countries and the comparison of regulation systems, some conclusions are made.The fourth chapter is the analysis on derivative financial instruments regulation from the law and economy aspects. I expound the market failure caused by derivative financial instruments from aspects of monopoly, externality and asymmetric information and the failure’s harm to the society. Therefore, the regulation on derivative financial instruments is necessary. Besides, the aim and effect of derivative financial instruments regulation are analyzed. At last, I make an analysis on transaction benefit in Chinese derivative financial instruments market at the base of transaction cost theory.The fifth chapter is study on present situation and development of Chinese derivative financial instruments regulation system. The development of Chinese derivative financial instruments can be divided into three stages since 1980 and characteristics for every stage are offered. Then, I introduce the current status of Chinese derivative financial instruments regulation system from the ETC and OTC aspects and anal size state-owned enterprises’entry into the derivative financial instruments regulation. Last but not least, I bring up the present problems of Chinese derivative financial instruments regulation system, which is the foundation for improving the regulation system.The sixth chapter is the most important part of the paper, covering study on the improvement of Chinese derivative financial instruments regulation system. Establishing the multi-level coordination regulation system for Chinese derivative financial instruments market is suggested. Firstly, I make an introduction on multi-level coordination regulation system for Chinese derivative financial instruments market. Secondly, transitional mode and aim-oriented mode for the multi-level coordination regulation system is analyzed respectively. Thirdly, based on the study on the mechanism for listing Chinese derivative financial instruments, I suggest the list ranking of Chinese derivative financial instruments. Fourth, I make some suggestions from three aspects. They are the Exchanges’and relevant associations’self-discipline and management, regulation on exchanges, and the law-setting improvement for Chinese derivative financial instruments regulation.The third part is the conclusion.At last, I argue that the derivative financial instruments regulation system is an interdisciplinary area for law and finance, which is worthy of studying from law and economics angle.