Research Of Legal Supervision On Financial Derivatives

Financial Derivatives is the high—tech products from global financial innovation tide wave during the 1970s and 1980s. It is a new sort of financial tool derivate upon traditional financial products, such as currency, stock, bond etc. Financial derivative has great risk caused by its leveraged, future and dummy characteristics. The economy of one nation or even whole world will be greatly influenced and damaged if it is not properly used or not strictly supervised. The outburst of a series of risk incidents related to financial derivatives, beats the alarm bell to the supervising authorities to Strengthen the financial supervision again and again. The sub-loan crisis in the United States is a good example: the serious lack of supervision in the process of transforming which is from the sub-loans of the real estate industry to sub-debt, has led to a partial financial risks . The risk spread to the entire financial system rapidly, which resulted in a tremendous impact on the economy as a whole. The global economy has also be significantly affected. How to set up the effective legal supervision system of financial derivative instruments has become the great subject which is demanded to be solved promptly in finance and law field of countries all over the world. This paper which considers the sub-loan crisis in the United States as an opportunity , attempts to do some beneficial exploration on legal supervision of financial derivatives.This article is divided into three parts which are introduction, body and conclusion.The body is divided into four parts.The first part is the general principles of legal supervision of financial derivatives, which is the theoretical basis for this article. Firstly, this part introduces the concept, types and characteristics of financial derivatives. The following is the introduction of legal supervision theory of financial derivatives. In this part, I analyze comprehensively the following problems which are the basis of legal supervision of financial derivatives, the new problems brought out by financial derivatives to legal supervision, the necessity to strength legal supervision of financial derivatives, the idea of legal supervision of financial derivatives and the mode of legal supervision of financial derivatives.The second part is the legal analysis of supervision system of financial derivatives in Major developed countries and international organizations. At the national level, the paper introduces the legal supervision system of financial derivatives of the United States and the United Kingdom. At the same time, the characteristics of their systems are analyzed and evaluated. At the international organizations levels, first of all, the systems of the Basel Committee about the supervision of financial derivatives are introduced , and the development and lack of "Basel Agreement" on the supervision of financial derivatives transactions are analized. This paper also introduces the IOSCO' s supervision coordination for increasing the risk management efficiency and related proposal to disclose the information of financial derivatives effectively. Finally, the supervision measures of ISDA are introduced, and the role of ISDA in the aspects of supervision co-ordination of financial derivative transactions is fully affirmed.The third part is the lack of international legal supervision of financial derivatives. The serious deficiencies of international legal supervision of financial derivatives is an important reason for the outbreak of the U.S. sub-loan crisis. The serious consequences resulting from lack of legal supervision make the financial supervision be the hotspot of international community. The G20 summit held recently recognized the lack of financial supervision , and the G20 summit members have also reached a consensus to strengthen financial supervision and have made some promises in the G20 summit declaration.The fourth part is the improvement of China's financial derivatives law. The first part reviews the development course of China's financial derivatives, introduces China's the status quo of legal supervision of financial derivatives, and points out the issues that are existing in China's legal supervision of financial derivatives. Learn from the lessons that the U.S. sub-loan crisis has given us in legal supervision of financial derivatives, based on our actual financial supervision, in the last part, the paper gives some suggestions for the improvement of china' s supervision laws of financial derivatives.