Research On The Legal Regulation Of Credit Default Swap

Credit Default Swap(CDS)is a credit derivative product aimed at mitigating credit risk.Through credit default swap transactions,the credit risk which used to be abstract,influential,and highly destructive can be priced and circulated in the market like ordinary assets,making credit default swaps important in price discovery and resource allocation.On the macro level,credit default swaps can strip the correlation between the underlying assets and their credit risks to prevent the whole body from being affected by the price fluctuations of the underlying assets,triggering the butterfly effect,thereby improving the overall economic operation efficiency and maintaining macroeconomic stability.On the medium level,credit default swaps can alleviate market credit risks,improve the efficiency of fund management,and thereby optimize the market's resource allocation function.On the micro level,credit default swaps are conducive to enriching the types of financial products,expanding investment channels in the market,and alleviating the financing problems of small and medium-sized enterprises.Credit default swap transactions can be traced back to the credit risk transfer contract designed by JP Morgan Chase Bank and the European Bank for Reconstruction and Development in the over-the-counter financial market in 1994.Through this bilateral contract,JP Morgan Chase Bank can transfer a part of the credit risk from the balance sheet to meet the statutory regulatory requirements for bank capital.Soon after the contract was born,it attracted the imitation of many market entities,and the credit risk transfer contract gradually developed into a special credit default swap transaction contract,and it began to develop continuously in the European and American financial markets.However,in European and American countries,there was few legal regulation matching with it at that time,which provided a loose institutional environment for the rapid development of European and American credit default swaps.However,while the risk mitigation function of credit default swaps promotes the development of financial markets,it also opens the door for investors to use credit default swaps for speculation.It is precisely under the speculators' pursuit of the interests that credit default swaps began to be alienated,Naked CDS,Engineered CDS,etc.began to appear in the financial market.The default swap market brought a huge impact,which eventually evolved into a contributing factor to the outbreak of the global financial crisis in 2008.After the 2008 crisis,the international community generally changed the legal system of financial regulation which aimed to strengthening the legal regulation of credit default swaps.As a result,credit default swaps ushered in an era of strong regulation.In contrast,our country's credit default swap started relatively late.Our country's credit default swap market was born in the post-crisis era,and it is not a bottom-up market-driven type like European and American countries,but a top-down government-driven type.The main purpose of our country's development of credit default swaps is to resolve non-performing financial assets,break financial exclusion,and support the development of the private economy.But from a practical point of view,if the crux of the European and American credit default swap markets lies in the excessive development of the market,then the credit default swap market in our country is just the opposite.Problems of insufficient development and slow development exist in our swap market,and the inherent risks are still distracting.At the same time,blockchain and other financial technologies are making progress and gradually infiltrating all areas of society.Under this circumstance,credit default swaps are bound to face impact and changes,which means that our credit default swaps market will face the traditional risks and emerging risks at the same time.As the "public weapon of the world",the law is bound to respond positively to these risks and challenges.Reviewing our country's legal regulation system for credit default swaps.A system containing the driving force of separate regulation and functional regulation,the parallel operation of government regulation and self-regulation,the combination of master agreement regulation and market access regulation,the integration of behavior regulation and transparency regulation,and the central counter-party's emphasis on multi-dimensional prudential regulation has been established,which has provided basic institutional supply for maintaining the healthy development of our country's credit default swap market,which is of great significance.However,the legal regulation of credit default swaps in our country is not perfect,and there are many urgent problems need to be solved.These include problems in the regulatory model,regulatory institutions,and regulatory process,as well as regulatory technology issues.Wise men learn by other men`s mistakes.Whether it is for the regulation of the traditional risks of credit default swaps or for the response to emerging risks in the blockchain background,the international community and European and American countries have started some active explorations and formed some valuable experiences,which are enlightening for optimizing and perfecting the system and mechanism of the legal regulation of credit default swaps in our country.Combing the legal regulation reform of credit default swaps in various countries around the world in aspects of representativeness and research value,it can be found that the relevant legal regulation reform experience of the United States,the European Union and international organizations meets the standard and has important research value.Based on the experience of other countries and combining with local actual conditions,our country's credit default swaps should be constructed as a whole from the level of regulatory model,regulatory institutions,and regulatory process,so that our country's credit default swap market can operate and develop on the track of the rule of law.Based on above,this article is mainly divided into seven parts:The first part is the introduction.This part mainly introduces and analyzes the origin of the article,the theoretical and practical significance of the research,the status quo of research at home and abroad,research methods,and possible innovations and deficiencies.This paper attempts to conduct a step-type study on the legal regulation of credit default swaps from the perspective of "theoretical basis--value consideration--mechanism structure" through comparative analysis,normative analysis,interdisciplinary analysis and other research methods from a comprehensive perspective of economics,sociology and other basic theories.This paper discusses the causes of legal regulation of credit default swap in our country and the way of system construction.The second part is the general interpretation of credit default swap and its legal regulation.This part is the ontology of credit default swaps,which deeply analyzes the connotation,basic categories,evolutionary laws of credit default swaps,and the roots,foundations and development status of our country's credit default swaps.At the same time,it discusses the connotation of the legal regulation of credit default swaps,the requirements of legal regulation,and the main systems of legal regulation of credit default swaps.The third part is the theoretical basis of the legal regulation of credit default swaps.This part will apply externality theory,risk society theory,faquan center theory,and institutionalist theory to explore the theoretical basis for the legal regulation of credit default swaps from the perspectives of economics,sociology,jurisprudence,and sociology,respectively.The fourth part is the current state and reflection of our country's legal regulation of credit default swaps.This section mainly analyzes and reviews the current situation of our country's credit default swap legal regulation from the aspects of regulatory model,regulatory institutions,regulatory process,regulatory technology,etc.Clarifies the problems and their causes,and lays the foundation for the subsequent improvement of the system.It is found that in the regulation model,there are problems such as lack of macro-prudential,lack of openness and flexible barriers.In terms of regulatory institutions,there are some problems,such as lack of coordination among regulatory bodies,imperfect self-regulation management and lack of international regulatory cooperation.In the regulatory process,there are some problems,such as higher access threshold,insufficient regulation of credit rating,imperfect information disclosure system and unsound liquidation mechanism.In the regulation of technology,there are problems such as difficult privacy protection,insufficient regulation and so on.The fifth part is the extraterritorial status of the legal regulation of credit default swaps and its enlightenment.This part mainly examines the legal regulation experience of extraterritorial credit default swaps from aspects of the United States,the European Union and international organizations.The purpose is to explore the experience of other countries,in order to provide a way to improve our country's legal regulation of credit default swaps.All in all,the legal regulation of extraterritorial credit default swaps can bring us the following enlightenment: In concept,adhere to the "efficiency and safety" equal emphasis;In terms of regulatory institutions,it is necessary to clarify the allocation of regulatory power,strengthen regulatory cooperation and coordination,and strengthen the regulation of "gatekeepers".In terms of regulatory law,the legal framework of systematic financial regulation and the sharing mechanism of financial risk information should be established.At the same time,it attaches importance to the legal regulation of "blockchain + credit default swap".The sixth part is the way to perfect our country's legal regulation of credit default swaps.This part,as the countermeasure part of system perfection,will be the core and purpose of this article.In response to the problems of the legal regulation of credit default swaps in our country,we put forward more practical and specific perfect countermeasures.First,to improve the regulatory model: it is necessary to construct a twin-peaks regulatory model,establish the concept of "intelligent regulation",and pay attention to the effectiveness evaluation of legal regulation.Second,strengthen the coordination of regulation: it is necessary to strengthen the coordination between domestic regulators,strengthen the international regulation cooperation,and pay attention to the improvement of the industry self-regulation management mechanism to provide a useful supplement for the coordination of regulation.Third,to optimize the regulatory process: it is necessary to improve the market access system,strengthen the regulation of credit rating,improve the system of transaction information report database,improve the central clearing mechanism,establish the bilateral clearing margin system,and improve the bankruptcy "safe harbor" system.Fourth,strengthen the regulation of regulatory technology: it is necessary to perfect the personal information protection system,construct the smart contract system,establish the algorithm regulation system,introduce the regulation sandbox system,and strengthen the regulation and technology legislation.The seventh part is conclusion.This part mainly summarizes the article and prospect the future.The legal regulation of credit default swaps has a social history.In the past,due to the influence of inexperience and path dependence,the legal regulation of credit default swaps in our country was not perfect,but now it is the perfect time for its optimization and improvement.In the era of comprehensive rule of law and the modernization of national governance systems and governance capabilities,we have reason to believe that our country can make remarkable achievements in the legal regulation of credit default swaps.