Study On China's Supervision Of The Index Future Market

In April 2010, China launched its first stock index future product– Shanghai Shenzhen 300 Index Future Contract. As the core preparation work prior to the launching as well as the guarantee for its smooth operation, how to design the supervision model and corresponding regulations for the new market became a topic heated debated by regulators as well as scholars. With the final establishment of the market, a supervisory and regulatory structure was also officially set up. However, whether such supervision regime could fully allows index future being a financial instrument to fulfill its function, to improve the structure of China's financial market and to drive forward the process of financial innovation, remains a question worth being discussed. To strong contrast of China's supervisory regime in index future market is the light-touch approach of the EU towards their advanced market therein. To view China's uniqueness in supervising index future market from an objective and relative perspective hence require a comparative study allowed by study on also the EU's market supervision.The thesis started with the fundamentality of index future– its definition, characteristics and functions, then moved to a overview on the world's index future market and an introduction on the different roles of each type of the market participants. The thesis than defined the scope and content of the concept"supervision"that will be discussed in the paper below, breaking it into two parts– the supervisory structure and the regulatory approach.In Chapter Two, the thesis provided a thorough introduction and analysis on the current state of the index future market, its establishment process and its supervision; analyzed the supervisory bodies, the relationship to one another thereof as well as the regulatory regime from all three levels - the state, the self-regulating industry associations and the exchange itself.In the third Chapter, the thesis conducted parallel analysis of EU index future market and there regulation; separately discussed the supervisory structures and suitable regulations of index future market both at EU level and member-state level. At EU level, it focused on the advantages of regulated market in risk control highlighted by the recent financial crisis; at member-state level, it introduced supervision system of Germany where the largest derivatives market in Europe is located.On the basis of the previous two chapters, Chapter Four compared China's and EU's index future market in terms of their market overview, supervisory structures as well as the regulatory approach, and through this way, demonstrated the unique aspect of China's supervision of index future market.Through the comparison, the thesis provides an assessment of China's supervision regarding, firstly, its effectiveness in controlling the potential risks inherent in the index future market and, secondly, regarding whether the supervision is light enough to allow the index future to play a meaningful role in the country's financial system.