Study Of The Regulatory System Of Financial Derivatives

Based on the exploration of the definitions and reasons for the existence of financial derivatives, the article analyzes the risks which financial derivatives are facing and puts forward the ways to avoid such risks. The comparison studies concerning the financial derivatives' monitoring systems and other corresponding systems of the developed nations is the focus of the article. The author also investigates and researches on the development and cooperation of international organizations regarding the monitoring of financial derivatives. Following the above-mentioned discussions, the author, considering the practices in China, promotes the framework for developing Chinese financial derivatives market. The article contains five parts as followings:Part one concerns the definitions and reasons for the existence of financial derivatives. After compares and analyzes various definitions of financial derivatives, the author combines the advantages of these definitions and offers a clear definition of financial derivatives as ' financial contracts or payment exchanging agreements based on or trading the basic financial instruments (or interests and rights) which shall determine the price. Considering different features of various financial derivatives, the author divides them into three categories according to their status, basic capital and transaction method, and states the legal characteristics of financial derivatives as contractual, promissory, bi-obligatory, unreal trading objects, double contractual purposes, financing and crediting, and the party autonomy. The author, analyzing the reasons for the fast development of financial derivatives, discloses the mutual development and adjustment relationship between financial derivatives and the legal environments, and points out that the legal surveillance shall play an important role in the development of financial derivatives.Part two is the risk analysis of financial derivatives, in which three aspects are included. Aspect one contains the risks arising out of financial derivatives, including the market risk, the credit risk, the transaction risks, the operation risks, the legal risks. The ill effects of such risks on economyand finance are disclosed. The fallowings are the description of the affairs due to financial derivative risks and comments hereon. The reasons and problems in certain affairs which shocked the global financial society are discussed here. The author points out the importance of promoting the anti-risk awareness in the market of financial derivatives. Focusing on the internal of investment organizations, the author suggests the important factors in the prevention of financial derivative risks.Part three contains three issues regarding the monitoring system on transnational financial derivatives. The various monitoring ways are introduced and those of the developed nations are represented and compared to find out the common natures in the monitoring systems on financial derivatives.Part four is about the international cooperation in the surveillance of financial derivatives. The latest movements of international organizations are introduced herein to illustrate the great meaning and development tendencies in such surveillance. The common features of different surveillance systems are analyzed to make clear the valid ways of surveillance on financial derivatives.Part five is the legal perspective on developing China's financial derivative market. The present status in China is quite in a mess while excessive investment hurts investors, and a well-developed basic financial market is in urgent need. Therefore, it is necessary as well as practical to develop the financial derivative market in China. The author further points out the feasibilities of developing the financial derivative market and concluded with the proposals on the legal regime and related systems.The author concludes this article with the perspectives on developing China's financial derivative market and emphasizes again the importance of surveillance.