The Research Of China’s Legal System On Margin Trading

As a new type of investment and avoid market risk tools, margin trading inoverseas securities market has been touted for years, which has played an active roleon buffering stock price volatility, improving liquidity of securities and expanding thestock market returns and finding its reasonable market price, and also is an importantway to improve the securities market mechanisms to promote financial productinnovation, optimize the allocation of resources in financial markets. As China’ssecurities market is still not mature enough for the maintenance of the stock marketstability and protecting investors interests, margin trading has been banned in thestock market, until2006, China’s new "Securities Law" come into effect, it deleted theprohibition from carrying out margin trading in securities market, from then on,margin trading has established its legal status in securities market in China, on March31,2010, the official launch of margin trading is a new milestone on development ofChina’s securities market, which marks the margin trading embarked on the financialmarket arena as a new financial innovation on China’s capital market.Margin trading is a high risk investment activity, in the margin trading, investorscan invest less money to achieve greater trading opportunities, The risk will beamplified in the stock market, therefore, in order to prevent integrity risks ofsecurities market, and ensure the smooth progress of the securities exchange, theUnited States, Japan and Taiwan of China and other mature stock markets haveestablished their own regulatory legal system to regulate and management on margintrading. China has fully implemented the margin trading business, but due to thecurrent specifications of our margin trading laws and regulations and the "Trust Law","Security Law" and other higher-level laws convergence was not enough, resulting inmany problems on legal and rational design of the legal system. We hope that therelevant laws and regulations will be gradually improved, a security systemintroduced, the level of constitute body that determine a ratio of security depositimproved, the mandatory proportions of security deposit provided explicitly, thecoordination mechanism of regulatory agencies also will be improved, which willensure margin trading developed smoothly and healthy in China.