The Disposal System And Improvement Of Abnormal Security Transactions

Abnormal securities transactions are not normal, but they will have a hugeimpact on all market participants and the whole securities market, including investors,securities firms and the stock exchange. As the organizer and first-tier regulator ofsecurities market, and because of its natural advantage of technology and humanresources, the stock exchange shall have the responsibility to maintain the stabilityand order of the securities market. To make the market and its participants calmly dealwith all types of emergencies, the authorities shall establish an abnormal transactionsdisposal system which can comply with the law and meet the market needs, andoperate the function of the stock exchange. However, China’s current disposal systemis not complete and leads to lack the scope of rights and restraint mechanisms, whichalways leads to a big controversy.Researching abnormal transactions disposal system is both theoretical andpractical. This article compares the domestic and foreign disposal system, and findsthe defects and shortcomings of the existing system. Furthermore, to explore the basicprinciples of the abnormal transaction and the right to disposal, we shall analyze thedisposal scenarios on abnormal transactions circumstances at home and abroad,basing stock exchange as the core. This article will include four specific topics: thetypes and disposals of the abnormal transactions, the nature and source of the right ofdisposal, the liabilities and immunities of the stock exchange and the improvements tothe existing disposal system. Chapter one,“The Outline of Disposal on Abnormal Securities Transactions”.Currently, the types of abnormal transactions are generally recognized domestic andoverseas as force majeure, accidents, technical failures and major errors. Thedisposals include temporary suspension, defer suspension and revocation ofsettlement. China’s existing system is defective in rough regulation, bad operation andlack of measures and restrains, which results in the stock exchange being suspected inlegality and rationality when the stock exchange exercises the right of disposal.However, there is a big room for improvement. By combing the basic situation ofChina’s current system, we lay the groundwork for the subsequent theoretical studies.Chapter two,“The Status and Principle of the Stock Exchange on Disposal”. Asan organizer and regulator of securities transactions, the stock exchange has dualcharacteristics both public and private legal person. When acting as a marketorganizer and service provider, the stock exchange is a private business organizationbody, and the legal relationship between the stock exchange and listed companies,securities firms will be adjusted by civil and commercial laws. As a market supervisor,the stock exchange is a public legal person. It exercises the right of self-regulationthrough managing listed companies, securities members and market. Matched withthe dual characteristics, the disposal right of the stock exchange is a mixture of theright and power. The right is derived from inherent nature, derivation andindependence. The power is based on enforcement endowed by the law. The right ofdisposal not only comes from legislative authority and executive authority, but alsocontractual agreement. When exercising the right of the disposal, the stock exchangeshall be followed in the principle of discretion, due process and moderation.Chapter three,“The Liabilities on The Stock Exchange”. From the perspective oftort law, the stock exchange shall be liable for damages if it causes losses to marketparticipants with "willful or gross negligence". Based on the contract law, the stockexchange bears the legal responsibility according to the "contract" between themembers, listed companies and itself. The "immunity" of the “contract” shall be inrestrictions of "willful or gross negligence". As the organizer of securities transactions,the stock exchange bears civil liability. For the force majeure and unexpected events, the stock exchange shall not be liable; however, for technical problems and majorerrors, the stock exchange shall compensate in accordance with the above principle.As the regulator of the transactions, the stock exchange assumes administrativeresponsibility. The stock exchange is a "quasi-government agency," and its legitimateexercise of regulatory authority should be regarded as fulfilling a public function. Inthis case, its civil liability should be exempted.Chapter four,“The Improvement of China’s Securities Abnormal TransactionsDisposal System”. Firstly, the legal system and measure institution shall be improved.The scope and disposal of the abnormal transactions shall be clearly formulated in the"Securities Act" and the implementing rules shall be set out by the stock exchange.It’s indispensable for us to avoid the disconnection of law and practice, and thesystems of “major mistake" and "revocation trade" should be introduced. Second,increase the procedural provisions of the dispose. On the one hand, to develop theprocedures of the business rules regulation; on the other hand, to detailimplementation rules of disposal measures, to enhance transparency and publicparticipation in the disposal process, and to establish relief mechanisms and liabilitiesmechanisms to the counterpart and the stock exchange respectively. In addition,balance the relationship between self-regulation and administrative supervision. Theadministrative authorities shall change management, to perform its functions inaccordance with the law, and to broaden the way to relieve of the stock exchange.Finally, establish the control mechanism on the right to dispose of the stock exchange,from internal and external. Strengthen the internal power constraint throughseparation of the power and improvement the internal structure of the stock exchange.In order to get external constraints, administrative and judicial powers shall beintervened.