Comparative Research On Supervisory And Legal Framework Of Central Counterparty

Central Counterparty(or CCP in short) is a clearing arrangement adoptted all over the world. Its history can be traced back to the foundation of clearing center of New York Exchange in 1892. In accordance with the definition released by Bank for International Settlement and International Organization of Securities Commissions, CCP ‘interposes itself between counterparties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer and thereby ensuring the performance of open contracts'. Though CCP unavoidably has this or that defects, because of its importance, some international institutions as well as a lot of financial market developed countries named it as one of the financial market infrastructures.As a fundamental system arrangement, whether CCP can fulfill original functions as people expected or not shall depend on relevant legal basis. Only when there's complete legal mechanism, the legal validity of CCP system can be protected then. For example, whether there's legal basis for the involvement of CCP, the legal validity of netting, the legal validity of membership chapter, the legal validity of security etc., will impact the normal operation of CCP directly. Therefore, perfecting relevant legal system shall be the key emphasis for the construction of CCP mechanism as well as other financial market infrastructures systems. For this purpose, the thesis reviewed and analyzed relevant legislations in main financial market developed countries.Besides the development of relevant legal basis, establishing effective supervisory mechanism shall be another emphasis for the construction of CCP system. When CCP acts as financial market infrastructure, it accumulates all risks of its counterparties to itself. The vital role of it to the financial market has been refleceted. In order to maintain the stability of financial market and eliminate systematic risks, comprehensive supervision on CCP has been implemented by regulators in each country. After comparing CCP supervisory mechanisms of relevant countries, we can find though the ultimate intention of regulators in each country was similar, in practice, the supervisory models and rules are still different from one to another significantly.Generally speaking, the establishment of CCP supervisory framework and make relevant rules shall be subject to discretionary decision of legislators and regulators of each country. And this is the key reason for the differences as mentioned above. Meanwhile, however, the involvement of some international institutions let the supervisory rules regarding CCP become unified. From legal perspective, rules worked out by those international institutions are not mandatory. But when they were brought into one country's own regulatory system, they would be entitled legal validity thereof. Nevertheless, there're still a lot of differences in CCP supervisory frameworks of different countries. And they will finally cause regulatory conflicts for CCPs who engage in cross border operation.For the reason of financal internationalization and the connection of international capital marekets, it's impossible for CCPs provding services without the involvement any foreign element. Therefore, cross border supervising on CCP is also a normal phenomenon in current world. In normal practice, regulations of one country can only have effects on certain CCPs through connecion points directly or indirectly. When there's overlap of connection points of different countries or districts, the regulatory conflicts on certain CCPs will generate. In order to eliminate regulatory conflicts regarding CCP, to avoid the inconvenience caused by market segregation, especially to compress the space for regulatory arbitrage, international society did a lot of efforts. On one hand, a lot of inter-government organizations and nongovernment organizatinos tried to work out international regulatory rules for CCP. On the other hand, some countries gave up their own supervisory powers through approach called substituted compliance and took it as an efficient way for the removal of regulatory conflicts. But because of the inheret defects of those approaches, they couldn't resolve regulatory conflicts of CCP thoroughly. Therefore, the establishment of global unified CCP regulatory framework becomes the most effective way.Under the background of globalization, it's necessary to found global unified CCP regulatory framework to eliminate relevant conflicts. From long term perspective, through the establishment of CCP regulatory framework, a lot of issues regarding cross border supervision can be resolved thereof. Meanwhile, work already done by countries and relevant international institutions enables such an assumption. Therefore, it should be a common aim of international society to build up such an international regulatory organization through reasonable effort.The importance of CCP to Chinese financial market is also undeniable. However, the existing regulatory framework and supervisory system in China cannot afford the sound development of CCP. In accordance with < Decision of the Central Committee of the Communist Party of China on Some Major Issues Concerning Comprehensively Deepening the Reform>, ‘Strengthening the construction of financial infrastructures, Securing the high efficient operation and comprehensive stability of financial market' was the important goal under ‘Accelerating the perfecting of morden market system'. CCP, as one of the financial infrastructures, is such a stability valve and accelerator which is vital to the financial market. In order to release its function and ensure the stable operation of it, sound supervisory system and legal framework shall be necessary. Meanwhile, according to <Decision of the Central Committee of the Communist Party of China on Some Major issues Concerning Comprehensively Moving Governing the Country According to the law Forward>, ‘Fundamentally, Socialist market economy is legalized economy'. ‘Strengthening the construction of legal system regarding market, ……, make out and perfect …… laws and rules regarding finance' was the key emphasis under ‘Strengthening legislation in key fields'. Therefore, relevant stakeholders shall adopt necessary and proper actions to push the development of supervisory system and legal framework of CCP in China.