Research On Legal System Of Supervising Margin Trade In China

Before margin trade was introduced into China, its risk had been considered seriously.Therefore, the margin trade pilot hadn’t been opened until the construction of legal system onmargin trade was basically completed and stock exchanges and securities agencies were fullyprepared. According to problems in operating the pilot, relevant legal system was revisedconstantly. It can be concluded that the opening-up of margin trade is synchronized with theconstruction of relevant legal system. In spite, the legal construction on micro-level still needs to beimproved. Especially, some specific institutions only regulate the principles, without practicaldetails. This thesis aims to point out the deficiencies on the current legal system of margin tradeand come up with suggestions for improvement by contrastive study between home and abroad.Starting from the concept of margin trade, the first part carries out detailed analysis ofmethods, features and functions of the margin trade. Then I would conclude the importance ofsupervising margin trade by introducing the status quo of margin trading operation in China.The second part analyzes the supervision models in the United States and Japan. With its vitaleconomy, the USA sets up strict supervision system, which is distinct from its free-market model.Having gone through the economic recession, Japan attaches greater importance to the supervisionof financial risks. All the other countries adopt supervision model on the basis of American andJapanese models. With no exception, the Chinese supervision model is domestication of these twomodels..The third part divided the supervision system of margin trade into three aspects: the legalsystem, the internal control and external supervision. The legal system consists13legal documents;the internal control mainly refers to the construction of supervision system inside securitiesagencies; the external supervision involves supervision sectors like the SFC, the Stock Exchange,Securities Industry Association, Securities Finance Corporation. However, due to lack ofcoordination between different sectors and gap between related institutions systems, the protectionof investors’ interest needs to be strengthened.The last part proposes suggestions for improvement according to the defects analyzed in theprevious part. Firstly, appropriate custody should be empowered to the securities finance company;Secondly, security system should be gradually established and the forced liquidation system shouldbe rationalized; finally, investors should be protected on the basis of moderate principles.