Research On The Legal System Of Margin Trading

Since March 31st,2010, the date that China started business pilot of the Margin Trading and Short Selling Business in Securities Companies, the Interest and fee income from the margin trading and short selling business has contributed to 16% revenue of securities companies, which has been much more than the assets management income. As a new and high potential business, the margin trading and short selling business has obviously been the key competition among securities companies.Along with the background, the margin trading and short selling business becomes the focus of theory research and securities operation. However, current available researches are focus on economics research, lacking of the systematic and deep research onto the legal system of the margin trading and short selling. Nowadays, the major legal regulation on the margin trading and short selling are regulated by <Regulation on supervision and management of securities companies), issued by the State Council. But the professional, detailed regulations onto the margin trading and short selling are still under making.The paper starts from basic theory of the Margin Trading, briefly introduced the concept of Margin transaction, the Margin Trading and Short Selling, basic types and character of the Margin Trading and Short Selling, also the risks in it. Later on, hackle the Margin Trading and Short Selling’s Law history, basic regulation elements, adjustments in the Civil and Commercial Law, so that be able to labor and elaborate the Trust design and Guarantee system of the Margin Trading and Short Selling in view of Trust, Guarantee.The paper frame is based on above contents, utilizes method of example, comparison, offer the original thinking onto China’s Margin Trading and Short Selling system innovation.The innovative points in this paper includes, in the Margin Trading and Short Selling, the element of legal relationship includes Credit body, Credit object, Credit contents, Credit period, Credit regulations.In the Margin Trading and Short Selling, the contract legal attributes are the Famous contract, the Mixed contract, the Consensual contract, the Formal contract, Contract of adhesion, The Continuous contract, the Bilateral contract. China has fulfilled system innovation on the Margin Trading and Short Selling via Trust system. The outstanding advance of Trust relationships are, both securities companies and investors are given multiple roles, to fit the both role positions in the Margin Trading and Short Selling; Double beneficiary setup balances the profit relations between securities companies and investors; Independence of Trust estate ensures securities companies’ estate profits, securities companies gain "Trust+Guarantee" double protect. In the Margin Trading and Short Selling, the guarantee character is The Transferring guarantee.Although the Trust design in the Margin Trading and Short Selling has been considered as innovative policy, the conflict and problem in the Trust design is still alive. those should be paid attention to and be solved f ina] ly. However, the conflict in Trust design could be solved effectively by having a clear benefit in order. The Trust mechanism design, mainly targets to solve Right Guarantee issues in securities companies. Normally, the securities companies should be treated as the 1st beneficiary, to get the pay off with priority. According to Trust regulation clause No.45, the beneficiary order and way must be indicated in the Margin Trading and Short Selling business contract. In a narrow sense, the Margin Trading and Short Selling character is Transferring guarantee, especially for the Trust Transferring guarantee.In China, Chinese lawmaking acknowledges law force of The Transferring guarantee, this is crucial to construct and perfect China’s the Margin Trading and Short Selling system.However, before the Transferring guarantee system getting officially legalized, following resolutions could be considered, l)The solution suit for the Trust policy. Trust policy regulates that the amount and shares in the Trust account belongs to Security companies. This helps to protect creditor’s rights of security companies, also helps to resolve the Legal attribute problem of guarantee in the Margin Trading and Short Selling.2) To use Judicial recognition of transferring guarantee solutions. Although Chinese lawmaking is lack of the Transferring guarantee policy, the Judicial recognition can be a good reference, that the Transferring guarantee policy can be administrated by the people’s court, to benchmark the Margin Trading and Short Selling guarantee policy. These methods good for solving controversy, hence to confirm the judicial position In the judicial level.