Legal Research On The Regulation Of Financial Futures Market Against Systematic Risks

When the fixed exchange rate in the Bretton Woods System was broken, financial futures, one of important financial derivatives in the market, was produced as an instrument to avoid and manage financial risks. Since the first Financial Futures Contract originated from Chicago Mercantile Exchange (CME), many other countries have followed in developing this market. Almost two decades ago, China once created interest rate futures, bond futures and stock index futures, but failed. Such failure makes market players and regulators understand that the development of financial futures market depends on the maturity of capital market, market players'understanding of the risks originated from financial products and the degree of perfection of the market regulation and risk control. After 1995 when Chinese Financial Futures Market went into the phase of suspension and consolidation, the topic of prevention and management of the risks of financial futures market has been discussed a lot, especially when the China Financial Futures Exchange was formally established in 2006. Currently, the regulators and the public focus on whether current risk supervision and control measures can bring safety and efficiency to the re-born financial futures market.The legal research on the risk supervision of the financial futures market is based on the knowledge of risk. The failure of Chinese financial futures market in last century came from the lack of knowledge in risk supervision and risk control. Neither the regulator nor the market participants could adequately and appropriately responded to the market volatility and risk accumulation, which led an unsystematic risk into a systematic risk that destroyed the whole market with a result of lack liquidity. Only by the market participants and regulators'thorough understanding of the risks, particularly the generation of systemic risk and its consequences, the financial futures market could restart with safety and efficiency. Accordingly, a systematic risk-based regulatory system shall be established and its relevant supervisory measures shall be improved.This paper starts from the discussion of the causes and consequences of systemic risk, and on this basis, making a reference to other countries regulation and supervision on financial futures market against systematic risks to find out what kind of measures shall by applied to avoid systematic risks. At the same time, different countries have different methods, means or ways to implementing regulatory measures. What kind of methods will improve the efficiency of regulatory measures? What kind of ways will helps the regulatory measures to comply with the development trend of financial futures market? To solve these problems, this paper may make an evaluation of the implementation of regulation measures, with the principle of cost-efficiency, to seek the attributes of the most appropriate implementation of regulatory measures against systematic risks, which may bring some enlightenment to the improvement of domestic financial futures market regulation and supervision.