| After the financial crisis in 2008, the central counterparty mechanism became the dark horse hero for saving crises with its outstanding performance, and was regarded as the safety valve for the derivatives markets by countries. Therefore, on G20 London Summit and G20 Pittsburgh Summit, various countries strived to narrow differences and reached a consensus in “G20 Leaders Statement: The Pittsburgh Summit”, i.e., it was required that All standardized OTC derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties; OTC derivative contracts should be reported to trade repositories. Non-centrally cleared contracts should be subject to higher capital requirements. Under Pittsburgh consensus, various countries, regions and international organizations develop vigorous financial reforms; “Dodd-Frank Act” and “European Market Infrastructure Regulation”(EMIR) require some range of over-the-counter derivatives must be centrally cleared; the “Basel III” has higher capital requirements to the non- centrally cleared derivatives, to encourage the derivative trades turn from over-the-counter to exchanges or be centrally cleared; Committee on Payment and Settlement Systems(CPSS) and International Organization of Securities Commissions(IOSCO) jointly release “Principles for Financial Market Infrastructures”(PFMI), aiming to set minimum standard for the risk management of financial market infrastructures including central counterparties; Shanghai Clearing House in China has been established, with the aim of establishing central counterparty mechanism to provide centrally clearing service for the RMB and foreign currency cash commodities and derivative trades in the inter-bank market.According to “Principles for Financial Market Infrastructures”(PFMI), a central counterparty interposes itself between counterparties to contracts traded in one or more financials markets, becoming the buyer to every seller and the seller to every buyer and thereby ensuring performance of open contracts. Making a general survey of legislations and clearing rules in various countries, the method of a central counterparty interposing is Novation or Open-offer. The legal relationship between the central counterparty and the traders shall be discussed according to practical situation, i.e., the legal relationship between the central counterparty and the clearing members is the contract legal relationship, and the legal relationship between central counterparty and the traders without clearing qualification shall be determined as per the legal relationship between the clearing members and the traders without clearing qualification; the understanding to the legal nature of a central counterparty shall not be limited to the subject of the contract in simple legal significance, or the range of clearing house or guarantee institution, but shall be determined under the background of public law and private law merging, i.e., a central counterparty is the self-regulatory organization with both public and private interests, which conducts self-regulatory management to the whole derivatives market by clearing members, and appears by taking the contract legal relationship in private law as the external form. The central counterparty mechanism makes the substitution to the rights and obligations of the original counterparty, and the substitution to the credits of the original counterparty; this substitution makes the central counterparties in legal significance become the guarantor in economic significance, which greatly reduces trade cost and increases contract liquidity, and strengthens the control to market risk and enlarges the effect of netting settlement system.The efficiency effect and safety effect of the central counterparty mechanism are critical, especially the safety effect, which is emphasized again by various countries after the financial crisis in 2008, and becomes the critical point to prevent derivatives market risk and ensure derivatives market safety; however, it is a pity that central counterparty mechanism is not perfect, and it has many conflicts; besides, during the process of promoting and implementing the financial reforms of various countries with Pittsburgh consensus, these conflicts are gradually enlarged and they are more and more outstanding. To make it specific, the conflict of the central counterparty mechanism is mainly the conflict between mandatory centrally clearing and risk prevention target, i.e., the internal conflict of a central counterparty; the conflict between the self-regulatory power of a central counterparty and the regulatory power of the regulatory authority and other self-regulatory power, as well as the conflict between the core status of a central counterparty and the competition policies are external conflicts of a central counterparty. These conflicts are mutually associated, which shall be solved together, or else, it may endanger the safety of the whole derivatives market, financial system or even the whole economy.The so called conflict between mandatory centrally clearing and risk prevention target is the risk paradox under Pittsburgh consensus, i.e., the central counterparty mechanism is not a risk eliminating mechanism, but a risk transfer mechanism, i.e., concentrating the credit risk of various traders dispersedly distributed in a central counterparty by means of credit substitution; besides, Pittsburgh consensus establishes this risk transfer mechanism on the basis of compulsory stipulation of law but not market selection, and expands the clearing scope from relatively transparent derivatives in exchanges to over-the-counter derivatives with complicated structure; a central counterparty is likely to undertake excessive obligations and risks, and it will greatly endanger or even destroy the derivatives market and financial market or even the whole economic system in case of risk management failure, which is inconsistent with the risk prevention target of a central counterparty. On facing with the conflict, the nature of the conflict shall be taken as the basis for the legal solution, i.e., the imbalance between safety effect and efficiency effect of the central counterparty mechanism as well as the imbalance between the public benefit and private benefit of a central counterparty under information asymmetry situation; specifically, there may be three legal solutions, i.e., mandatory information disclosure scheme, private benefit removing scheme and intermediate scheme. The so called mandatory information disclosure scheme refers to the legal solution scheme taking the implementation of mandatory information disclosure as the only measure, and the legal solution of internal conflict of the central counterparty mechanism mainly relies on the strength of the market but not the intervention by the government; it seems to aim to the nature of the internal conflict, however, in economic practice, it is not a perfect scheme, which can only improve the problem of information imbalance to some extent, but not promote the market to achieve to complete information state. The private benefit removing scheme changes the aim of public and private benefits to public benefit only by eliminating one end of the internal conflict of the central counterparty mechanismprivate benefit, to solve the problem of the conflict between public benefit and private benefit of a central counterparty, but this may make a central counterparty become a government sector, gong far from market; besides, it lacks the incentive of effective concentrating, screening and integrating to dispersed knowledge or information, and a central counterparty changes from information superiority party to information inferior party, which cannot seek for the balance between financial safety and financial efficiency. Therefore, neither mandatory information disclosure scheme nor private benefit removing scheme can be adopted, because both of them are extreme methods, with excessive blind faith in market strength or government strength; by the nature, it is caused by failure of understanding the relationship between market and government. Therefore, the legal solution scheme for the internal conflict of the central counterparty mechanism is to coordinate and mobilize the strength of the market and the government in an effective way, i.e., to adopt the intermediate scheme – risk regulation.In order to achieve preferable risk management system of a central counterparty, to make balance between the public benefit originated from government and the private benefit originated from market under this risk management system, it is necessary to implement the incentive compatibility theory in the risk regulation scheme, i.e., financial regulation cannot only start from the target of regulation to set regulation measures, but also shall take reference to the operating target of financial organizations, to include internal governance of financial organization and market restraint into the scope of regulation, and guide the two aspects of strength to support for the realization of regulation target; specifically, implement the incentive compatibility theory in the principal-agent relation between the government and the central counterparty, the principal-agent relation between the traders and the central counterparty and the internal governance of central counterparty. On the layer of principal-agent relation between the government and the central counterparty, firstly, the private benefit basis of the obligations undertaken by a central counterparty shall be taken into consideration for the risk regulation by government, i.e., it is necessary to take the private benefit of a central counterparty into consideration at the same time of making it understanding the obligation, only in this way, it is possible to avoid the conflict between government and central counterparty. Taking the regulation to the clearing scope as the example, the government shall pay attention to the private benefit basis of undertaking clearing obligation by a central counterparty, and return the market selection right to a central counterparty, to solve the problem of the conflict between government regulation and the private benefit of a central counterparty fundamentally. Secondly, the government shall ensure necessary self-regulatory space of a central counterparty, which can separate the public benefit of government risk regulation and the private benefit of a central counterparty; besides, in self-regulatory space, it is available for a central counterparty to conduct constant risk management innovation, to optimize the separation of public and private as well as conduct incentive compatibility. Taking margin rule as the example, the government shall provide a central counterparty with sufficient space for formulating and implementing the margin rule. Thirdly, it is necessary for the government to appropriately promote the incentive relationship between the central counterparty and the clearing members on risk management, to solve the principal–agent problem in the central counterparty mechanism, as well as the problem of insufficient motivation on attention of safety effect. Taking the regulation to default risk management system as the example, it is necessary for the government to propose legal requirements on the distribution of various financial resources in waterfall on legislation layer, to promote the mutual incentive between the central counterparty and the clearing members on risk management. Fourthly, in condition of failure of unity between the private benefit of a central counterparty and government risk regulation, it is necessary for the government to regulate the behavior of the central counterparty for private benefit to ensure and promote the realization of the regulation target. Taking the regulation to investment behavior as the example, it is necessary for the government to regulate the investment behavior of the central counterparty, to eliminate adverse incentive, and further incent the central counterparty to optimize the risk management in a constant way. Fifthly, it is necessary for the government to abandon the traditional regulation method under omnipotent rational blind faith, but shall bring negotiation in risk regulation, and promote regulation law in accordance with market situation and changing according to situation by four steps of feedback, discussing, reaching agreements and amending laws, to further promote the compromise between the government and the central counterparty on this basis. On the layer of principal-agent relation between the traders and the central counterparty, it is necessary for the government to force the central counterparty to disclose risk management information, and rebuild the comment structure of the traders to the central counterparty, i.e., change from only efficiency effect to balance between safety effect and efficiency effect, which shall be the basis for central counterparties racing to the top. In another word, it is to promote the constant improvement of the risk management level of the central counterparty by the comment of the traders to the risk management level of a central counterparty as well as the selecting behavior based on the comment. On the layer of the internal governance of a central counterparty, which is the medium of game between the government and market, it is necessary to conduct special arrangement to the internal governance of a central counterparty, i.e., externalizing the internal governance and internalizing the external intervening on the basis of current special law arrangement, to establish public benefit consideration mechanism, to prevent the moral hazard for the owner and the management team to adopt private benefit and abandon public benefit, and incent a central counterparty to take the benefit demand of the government and the market into consideration in a just and overall way when constructing the central counterparty risk management system, and make both parties compete and achieve balance. In this way, it is available for the risk management by the government to achieve incentive compatibility, and the central counterparty will construct and maintain the preferable risk management system, and balance between public and private benefits, to conduct effective control to the risk caused by the internal conflict of the central counterparty mechanism. However, it does not mean that it can eliminating crisis forever; therefore, the crisis disposal scheme of the central counterparty shall be set besides the risk regulation scheme under the incentive compatibility theory, to conduct legal arrangement for the failure of the central counterparty risk management, to stop the occurrence and spreading of systemic crisis.During the process of disposing the crisis of the central counterparty, it is also necessary to prevent the moral hazard of the central counterparty caused by the “too big to fall” regulation, i.e., it is necessary to construct the crisis disposal arrangement under moral hazard prevention, to avoid the occurrence and spreading of larger range of financial crisis at the same time of making the central counterparty undertake the closing down risk under the market survival of the fittest rule. The crisis disposal arrangement under moral risk prevention is mainly divided into three procedures, i.e., advance preparation procedure, recovery procedure and formal disposal procedures. In which, the advance preparation procedure is the basis for the effective development of the successive procedures, and the recovery procedure is way for protecting commercial liberty and reducing social cost; in these two procedures, moral risk problem is the Sword of Damocles, which shall be taken into full consideration by the government. During the formal disposal procedures, it is necessary for the government to ensure the persistence of the systematic important function of the central counterparty, for which to conduct liquidation and closing down as general market entities, to realize the moral risk prevention target and the crisis disposal target at the same time.The so called conflict among self-regulatory power of a central counterparty, regulatory power of a regulatory authority and other self-regulatory power is the power conflict in the relative network formed by the self-regulatory power of a central counterparty, regulatory power of a regulatory authority and other self-regulatory power; especially in condition of Pittsburgh consensus and financial reforms of various countries, the relative network with central counterparties as the middle point is more stressed, and the power operation situation in the derivatives market is intensive day by day, and the conflict among self-regulatory power of the central counterparty, regulatory power of regulatory authority and other self-regulatory power will weaken the effect of Pittsburgh consensus and financial reforms of various countries. In the chaos situation of power operation, it may even lead to the unbalance of efficiency and safety of derivatives market and the repression of financial efficiency, as well as the impact on financial safety. When facing with such a conflict, the legal solution shall be the power allocation on basis of arranging the relation between power subjects, to provide reasonable economic explanation on the final distribution of powers and the mutual relationship, and realize self-consistence on the law layer.There are three kinds of relationships between the self-regulation of the central counterparty and the regulation of the regulatory authority i.e., the relationship of regulator and the regulated of “self-regulation first and regulation later”, the shared governance to the derivatives market of “self-regulation first and regulation supplementary” as well as the interactive relationship of mutual cooperation and mutual restraint. The first two relationships originate from the discussion on the inadequate regulation by the regulation authority and the inadequate management by the central counterparty, and the power allocation on this basis mainly solves the problem of the boundary between the self-regulatory power of the central counterparty and the regulatory power of the regulatory authority. Therefore, it is necessary for the regulatory authority to implement the obligation of the judge procedure of “surplus of the central counterparty self-regulation” under the right control mode of “general authorization + administrative procedure + judicial review”; the agreement authorizing the self-regulatory power to the central counterparty shall be restrained by public benefit, and there should be the incentive consideration procedure in the authorization process, to provide self-consistency of law for the authority boundary obtained by economic consideration. The third relationship originates from the attention of the common directionality by the regulatory power of the regulatory authority and the self-regulatory power of the central counterparty on derivatives market; the power allocation on this basis mainly solves the problem of coordination and restraint between the two powers. Therefore, it is necessary to establish preferable coordination mechanism and restraint mechanism between the two powers, to promote the reasonable distribution of the the regulatory power of the regulatory authority and the self-regulatory power of the central counterparty in the interactive relationship, to make both parties form resultant force, to promote the maximum market regulation efficiency together.In the relationship between the self-regulatory power of the central counterparty and the self-regulatory power of other self-regulatory organizations, the clearing house and the exchange under horizontal mode appear as the principal-agent relationship with the clearing house as the core on self-regulation layer. In this relationship, there is moral risk in the exchange; besides, in the condition of self-regulatory roles dislocation of the clearing house and the exchange which are caused by commercial game playing and hidden by business format, this moral risk is more intensive. Therefore, the power allocation of the self-regulation of the clearing house and the self-regulation of the exchange are mainly determined by the solving of the moral risk problem; in other words, implement the theory of taking the clearing house as the core of self-regulation in law and contract arrangement, to rebuild the correct roles and status of the clearing house and the exchange in the principal– agent relationship; by including the exchange into the range of self-regulation of the clearing house and constructing responsibility sharing mechanism to balance the power and responsibility relationship of both parties to eliminate the moral risk. At the same time, there is mutual restraint relationship between the clearing house and the exchange on the self-regulation layer, and the power allocation on basis of this relationship is mainly determined by the establishment of the mutual restraint mechanism between the clearing house and the exchange; specifically, on the basis of including the exchange in the self-regulation of the clearing house, construct coordinative self-regulation mechanism and dispute resolution mechanism of self-regulatory organizations of the industry. The conflict between self-regulation of the central counterparties in horizontal relationship is not very sticking out, which only exists in the intersection part between powers. On the intersection part, the relationship between central counterparties may be cooperative relationship or agency relationship, and the allocation method can be determined according to existing experience, i.e., according to the rules of peer to peer links mode or participant links mode, the coordinative mechanism is determined and the coordinative management mechanism aiming at extra risk is determined, to avoid the inappropriate power allocation shaking the basis of various central counterparties' risk management.The so called conflict between the core status of the central counterparty and the competition policy refers to the three main conflicts under Pittsburgh consensus, i.e., the anti-competition on derivatives market structure layer, the anti-competition during the formation of the core status of the central counterparty and the anti-competition of the central counterparty as the quasi-government department. When facing with the three main conflicts, there are three main legal solutions, i.e., the competition policy prior to the central counterparty mechanism scheme, the central counterparty mechanism prior to competition policy scheme and the coordinating scheme between the two; in consideration that the first two schemes cannot obtain the legitimacy in law, therefore, only the coordinating scheme can be adopted as the conflict solution, i.e., on the basis of admitting that the central counterparty obtaining of market core status has adverse influence on derivatives market competition condition, eliminate the anti-competition of market core status of the central counterparty by the necessary regulations on the anti-competition behavior of the government and the necessary regulations on the anti-competition behavior of the central counterparty, to coordinate between the central counterparty mechanism and the competition policy.The regulation on the anti-competition behavior of the government on the central counterparty mechanism layer is mainly on two government anti-competition behaviors, i.e., the regulation on the behavior of the government to set market barrier and the regulation on the behavior of the government to assign trade in a compulsory way. As for the former one, on the central counterparty qualification permitting, it is necessary to observe the fairness and opening principle; on the safe standard setting, necessary principle shall be observed; on financial safety measure selection and coordination scale problem, it is necessary to coordinate the relationship between financial safety and competition mechanism and observe the minimum damage principle. As for the latter one, it is necessary to lay the focus on the eliminating the adverse influence of the legal arrangement making the central counterparty be the core of derivatives market on competition mechanism according to the minimum damage principle, i.e., start from the variables with influence on the anti-competition, to promote preferable competition status under open market by denying that the government has exclusive permission and decision-making power on specific derivatives clearing qualification, to reduce the anti-competition effect. Besides, under the situation of the rapid development of financial products and the extremely complicated derivatives market, in order to ensure all the government anti-competition behavior regulations be effectively regulated and legitimate, we need to construct the multi-regulation frame composed by competition review procedure, competition evaluation procedure, administrative regulation procedure, administrative reconsideration procedure, judicial review procedure, as well as the special competition review and evaluation procedure in crisis disposal procedure, to conduct overall and effective restraint to the legislation behavior, administrative behavior and state aid.The regulation to the anti-competition behavior of the central counterparty can start from three main aspects, i.e., the regulation on the central counterparty abusing market dominant position behavior, the regulation on the central counterparty contracting monopolistic behavior and the regulation on the central counterparty concentrating behavior. In the regulation on the central counterparty abusing market dominant position behavior, it is necessary for the government to observe the principle of coordinating between the central counterparty mechanism and the competition policy, and hold the careful attitude on special competition law principle, i.e., pay attention to avoid the occurrence of other unfair competition, and accurately identify if the central counterparty and its behavior in specific condition is in accordance with the applicable conditions for special competition law principle, and implement the coordination method between the central counterparty and competition policy. In the regulation of the central counterparty contracting monopolistic behavior, it is necessary for the government to hold reasonable principle, to take the scaled market tendentiousness, quasi-government department as well as the management risk and guarantee financial safety duty of the central counterparty into consideration, and conduct specific analysis and treatment to the interconnection arrangement and stagger competition behavior of the central counterparties as well as if there is anti-competition on the exclusiveness agreement behavior with clearing members, as well as how to regulate. In the regulation to the central counterparty concentrating behavior, besides general consideration standard, it is necessary for the government to conduct necessary special consideration during the concentrating review process; in other words, during the horizontal concentrating of the central counterparties review process, it is necessary for the government to take the scaled market tendentiousness into consideration; in the vertical concentrating of the exchange and clearing house review process, it is necessary for the government to pay attention to the adverse influence of the market power obtained by the open interests of clearing to other exchanges; at the same time, it is necessary to clarify the relationship between the government and the market, to abandon the rationalism tendency under the discussion on the advantages and disadvantages of vertical mode and horizontal mode; finally, all the concentrating reviews shall include the consideration to the reasonability and necessity of financial safety. Besides, in order to ensure the validity and legitimacy of regulations, we shall take the specificity of the central counterparty into consideration, to adjust the regulation procedures of corresponding anti-competition behavior, i.e., in private executive procedure, we shall conduct the professional reinforcement for judges and proof burden adjustment which aims to the information asymmetry problem; in public executive procedure, we shall adopt the double governance mode of competition competent institutions and industry competent institution, to fully coordinate the relationship between the central counterparty mechanism and the competition policy.In short, the legal solution of the conflict between mandatory centrally clearing and risk prevention target relies on the risk regulation under incentive compatibility theory and the crisis disposal arrangement under moral risk prevention; the conflict among the self-regulatory power of the central counterparty, the regulatory power of the regulatory authority and other self-regulatory power relies on the relationship clarification and power allocation between power subjects; the conflict between the core status of the central counterparty and competition policy relies on the way to implement the coordination method between the central counterparty and competition policy. In this way, the internal and external conflicts of the central counterparty mechanism can be effectively solved, and the global financial reform can be successfully promoted, and the steady and healthy development of derivatives market can be sufficiently ensured. |
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