Legal And Regulatory Research, China's Financial Swaps

As a new emerging financial derivative instrument, since 1980s, Swap has become one of the most popular instruments of derivate. However swap can promote global financial integration, at the same time, also provide a chance for accumulation of risks.It can decentralizate and transfer risks but can't eliminate risks. Chinese financial swap has developed rapidly since it was born, but mature enougn. On one hand,we want our country to develop and utilize the swap in line with world market; On the other hand, it is necessary to strengthen the supervision of the swap market, in order to prevent and resolve risks.Swap is a double-edged sword that includes both functions and risks. Swap can avoid risks,reduce financing costs, broaden the financing channels, improve capital gains and promote the integration of global financial market; Swap may faces credit risks and market risks because of economic, political, social and other factors. The risks are unexpected, complicated, concentrated, infectious,what's more , it is more easy to cause systemic risk; Market has its own machanism for regulation of risks, but as general market, there are also failures in swap market. So the market is not fully able to prevent and control these risks. It is essential to provide many levels of supervision to make up for the implementation of market failure, the supervision can effectively guard against systemic risk, safeguard public interests and the interests of market participants. As the current situation of development and regulation for Chinese swap market, therefore, there is an initial idea about supervision on swap in china. It is under the premise that is respect for the market disciplines,based on laws and regulations. The supervision includes government regulation, self-regulation of business organization, internal control of financial institutions and international cooperation in order to provide legal protection for swap development and our financial market.