Research On The Legal Issue Of Supervision Of Shipping Freight Derivatives Market

Shipping freight derivatives are originally developed for the purpose of investment as well as risk hedging. But some of our big central enterprises often fail with great floating deficit rate on the market of financial derivative securities exchange, causing an uproar in shipping community. As a means of risk hedging, why has it brought about a huge loss to the enterprise? Actually what may account for this loss is that the enterprises mainly focus on the speculation. Besides, irregular unauthorized operation, insufficient risk control, defective inner control mechanism are the factors to be well examined. Yet the chief reason is that the system of the market of shipping freight derivatives remains to be perfected.Having studied the development situation and tendency together with the transaction SCFI in 2015, and having analyzed the reasons why there is a big gap between the actual market deal of our present shipping freight derivatives and Clarkson prediction, the writer has found that the domestic market is facing a risk of being manipulated by big shipping enterprises or maritime union. Also the great loss the central enterprises suffered from on the market of derivatives has made them step back. Meanwhile the government has launched some regulations that limit state-owned or central enterprises in derivatives transactions. All of the factors above have caused great effect on the circulation of derivatives. Different laws of different countries on derivatives transaction, the lag of the law itself and the absence of restriction have made a gray zone for legal supervision in the application of laws. From what has been illustrated above, we can conclude that there is a necessity that the market of shipping freight derivatives should be supervised promptly.Nowadays in our country the freight index system has just been established, and there is only one “Administrative Regulations on Futures Trading” that is available to us. For the current situation, the writer holds the view that it is necessary to have it under multi-level supervision and put forward a better scheme for the whole law system of shipping financial derivatives that appear in the supervision with a concept of appropriate legislation. “Shipping derivatives exchange act” should be made when conditions permit together with a relevant court of financial derivatives to perfect the judicial relief function. At the same time, the writer thinks that the government is required to establish a management system for shipping freight derivatives based on the present hydra-headed government; that self-supervision of internal control should be polished up constantly especially in bourses; and that the abilities of interpretation and application of legal files in supervision should be raised. Furthermore the awareness of being supervised and punished for abusive trading practice should be strengthened.