International Financial Derivative Transactions Guarantee System

The international financial derivatives transaction develops on large scale andis playing more and more important role in the international finance area, this kindof controversial transaction also bring in some complex legal problems. Comparedwith the developed country in which financial derivatives transaction develops inamazing speed and be controlled by more mature legislation, the systematicfinancial derivatives market in our country has not been built up yet and relativeresearch is far from satisfaction, towards which we must take positive and prudentattitude. International financial derivatives transaction based on credit andcollateral arrangement became one of the most important way to reduce the creditrisk from international OTC financial derivatives transaction, but collateralizedtransaction at the same time gives rise to other forms of risk including legal risks.This thesis pays attention to the internationally recognized collateral arrangementsrelated to international financial derivatives transaction, focus on the effectivenessand enforceability under traditional legal framework of standard collateralagreements issued by the International Swaps and Derivatives Association(ISDA),which is the leading global trade association representing professional marketparticipants in privately negotiated derivative transaction, with the hope of puttingforward beneficial opinions on the structure of collateral arrangement ininternational OTC financial derivatives transaction in our country.This thesis includes three chapters as following:In the first chapter, through the introduction of ISDA and it's "credit supportarrangement", the author draw the conclusion that although credit supportarrangement and traditional collateral transaction have the same intention and thereare many common ground in operation between them, the credit supportarrangement has its specialty which makes it different from the collateraltransaction in the common legal context in many aspects. Because of thedifferences, it becomes uncertain that whether the ISDA "credit support annex"adopted by parties in transaction can be recognized by the native legislation of a certain country.The Chapter two mainly concerns the publication of the ISDA credit supportdocumentation and the author choose NYCSA which represent the securityinterest approach and ECSA which represent the title transfer approach of ISDAcredit support arrangement to do a comparative research on the enforcement ofcredit support documents in some developed country's legal circumstance,especially the enforceability of the ISDA credit support documents under legalframework of bankruptcy and security interest.The third chapter makes further research and summing-up on the fusion ofISDA credit support arrangement and traditional legal theory in bankruptcy lawand security interest law, at the same time introduce the reformation of bankruptcycode in American and European Union with the attempt of catching up with thedevelopment of the modern international financial derivatives transaction, whichmakes the proof of the necessity and feasibility of the fusion of ISDA creditsupport arrangement and traditional legal theory in native laws.The author tries to construct collateral arrangements of international financialderivatives transaction in our country in the last chapter. Considering thedeveloped country has much experience on the practice of international financialderivatives and the relatively mature legislation with respect to the specialenforceability of the collateral arrangements, it is suggested to make furtherresearch on the advanced institution in those countries. With respect to theregulations in the bankruptcy law and the security interest law of China which areinconsistent with the practice of financial derivatives transaction, it is proposed inthis article that the Law on Financial Derivatives Transaction be passed, accordingto which the credit support arrangements, whether taking security interestapproach or title transfer approach, are valid and enforceable and would not besubjected to avoidance, reversal or stay in case of winding up or reorganization ofa counterparty, which will make good circumstance for the development ofinternational financial derivatives market.