Legal Study Of China’s Financial Derivatives Risk Prevention

In the1970s, referred to as financial innovation of the banking industry’s revolution began to enter people’s vision, then with the continuous development of economy and technology, financial instruments also started the innovation steps. Financial derivatives as an important part of financial innovation, has the dual attributes of high profit and high risk, more and more get the attention of people. Today, the financial derivatives risk prevention has become a hot topic. At present, China’s financial market is gradually developing with the international financial market, and the financial reform is also deepened. Innovation as the internal dynamics of the development of the financial industry brought to the attention of our country. However, the development of financial derivatives of our country started late, and there are also many defects. It increased the risk of the development process. At the same time, it does not have the maturity of research concerning legal issues of risk prevention of financial derivatives. The development of financial derivatives in China is difficult under the imperfect legal environment. Therefore, constructing perfect the legal system of financial derivatives risk prevention is very necessary, also is very urgent.Start from the introduction of the basic theory of financial derivatives, this article gradually leads to the idea of perfecting the legal system of financial derivatives risk prevention, through elaborating the existing problems as well as foreign legal system on financial derivatives risk prevention.Financial derivatives determine the price of the underlying financial target which will be traded at a certain moment in the future in the form of contract. Compared with traditional financial instruments, it is a shot fortunately contract, representing the right to request of financial interest in the transfer in the future and their trading obligations in the future. They have strong leverage and uncertainty, so that the benefits and risks can be amplified. These risks may come from the economic environment, and may also come from the legal and policy environment. They have occurred and can not be avoided sometimes. Thus, the legal regulation of financial derivatives should be more attention to the risks. However, China’s current legal system on financial derivatives risk prevention has many problems. The problems of incomplete legal framework at this stage, low legal effect, over-reliance on public law, the legal lag are serious. Imperfect information disclosure system, credit system and market access system provide opportunities to malicious manipulation of practitioners and Non-compliance with the law.Therefore, in order to solve the above problems and prevent the risk of financial derivatives more effectively, China must improve the legal system. The successful experiences of foreign legal systems of financial derivatives regulation are also provided for our country. For example, we can leam from "2000Commodity Futures Modernization Act, the financial reform bill enacted after the financial crisis, and the German financial market stabilization". They suggest that China should improve the supervision of the legal system and provide a legal basis and legal protection for giving full play to the role of the central bank.On this basis, the paper argues that China should establish a comprehensive legal system which national legislation to regulate led commercial banks internal control system for the auxiliary. On the one hand, China should build a sound legal system framework to guard against financial risks of derivatives under the guidance of the scientific concept of legislative. This requires that China promulgates a unified "financial derivatives innovation and Exchange Law" and then speed up the legislation for specific financial derivatives, such as the enactment of "the options trading ordinance". At the same time, strengthen the corporation with the "Company Law" and other infrastructure is also important. On the fact of financial private law, China should also enrich the content and add financial derivatives risk prevention provisions of the operating mechanism. On the other hand, the improvement of the regulatory legal system can not be neglected. China should enact the "Financial Derivatives innovation and transaction information disclosure institution" and "Financial derivatives Credit Rating Act". Then we should strengthen the coordination of the information disclosure system, the credit system with the Criminal Code and other laws. At the same time, we can supplement their civil liability compensation institution to avoid the case of non-compliance with the law. Finally, on the fact of microeconomic subjects building the system of control risk, commercial banks should improve internal legal argumentation system, financial system and audit system on the basis of the establishment of internal risk control organization. At the same time, we must strictly afterwards accountability and establish risk relief system.