Financial Derivatives Market Supervision Theory And Practice

In the last three decades,markets for financial derivatives have been found and flourished. Financial derivatives have proven to be powerful tools for managing financial risk. these complex and volatile instruments contain huge risk. Some large financial institutions and industry corporations ,including BB&Co, LTCM and GM ,have failed because of misuse of financial derivatives.This and other recently reported cases of losses have drawn our attention to the risks of these derivatives, and concerns about financial derivatives today extend beyond price stability to systemic risk , The possibility that the failure of one firm as a result of derivatives trading would trigger the failures of other firms.Some observers have campaigned for more stringent regulation of financial derivatives markets.But other observers believe that the current regulatory structure is capable of supervising the markets, and here doesn't exist so-called systemic crisis. Faced with the challenge brought about by financial derivatives government regulators have improved and broadened regulation aim to minimize systemic risk. China is in the important stages of financial reform .It is important to study supervision of financial derivatives market in China. Now there are lots of researches on the issue.But most of them just talk about a matter in isolation.The paper discusses regulation of financial derivatives markets in combination of theory and practice.The paper attaches importance to integration of theory with practice.In the theory part,drawing on the theory of market failure and regulation economics and study on financial supervision,the paper elaborates on financial derivatives market supervision. The author brings forward the concept of effective supervision,which is based on the relation between market and regulation.In the practive part,the paper focuses on the financial derivatives market supervision system with analysis and synthesis in study method.In the final part.Beginning with a historical study on the development of financial derivatives market,the author points out it is feasible and necessary to establish stock index future market in China and analyzes the current situation,problems and defects of Chinese financial supervision.Then he emphasizes that China should intensity supervision on stock index future market ,and finally,some suggestions on Chinese stock index future market supervision are given.The main contents and viewpoints are as follows:Chapter one: introduction.In the chapter,the author begins with a biref introduction of the financial derivatives and financial derivatives markets,then a complete definition of financial derivatives market is given.The author emphasizes the definition should include the practitioners' self-regulation in financial derivatives tradings.Finally,the paper introduces the aims, measures, pattern and structure of financial derivatives market supervision.Chapter two: study on the general reason for regulation. First,a general analysis is given on the risks in financial derivatives markets. Second, a lot of well-publicized cases of firm-level losses as well as market turbulence are discussed.Finally,the paper focuses on market failures,which is the rationale for financial derivatives markets supervision.Chapter three: the aims of financial derivatives markets supervision. In this chapter,the author clearly points out that the market supervision should be aimed at counteracting systemic crisis and maintaining markets orderly,keeping fairness in market and protecting the investors.Chapter four: the principles of financial derivatives markets supervision.The author stands for financial derivatives markets supervision that must follow such four principles:cost-benefit rule,unity and coordination,systemic rule and the combination of stability and flexibility.Chapter five: study on the limits of financial derivatives markets supervision.First,the costs of supervision is discussed both directly and indirectly.Second,In reality,the regulator may be captured and deviate fr...