Research On The Legal Enforceability Way For Close-out Netting In China

OTC derivatives have been deemed as a way of investment with high risk.Close-out Netting has been playing an important role in OTC derivatives which can effectively control and lower the exposure for the counterpart of his credit risk,fixing its fragile credit system.However,Close-out Netting has not been equipped with a legal status in China.What's worse,there're many contradictions between Close-out Netting and Bankruptcy Law,making it difficult realizing its functions and values.On the other hand,the procedure of interest rate liberalization and the construction of Shanghai International Centre develop more urgent requirements for the recognition of the legal enforceability of Close-out Netting.This dissertation aims to figure out the contradictions between Close-out Netting and Bankruptcy Law.On the basis of extraterritorial legislative experience of developed countries as well as the legal practice in Shanghai FTZ,this dissertation tries to develop a new legal enforceability way outside traditional legal advices,that is,the legal interpretation reform pattern of temporary suspension of law implementation.To be detailed,the State Council or the Standing Committee of the National People's Congress of Shanghai is entitled to put forward a legal interpretation proposal by principle interpretation way and teleological interpretation,clarifying that it is high time we confirmed the legal status of Close-out Netting with the acceleration of interest rate liberalization and the implementation of Deposit Insurance Regulation and requesting the temporary suspension enforceability of the Bankruptcy Law concerning Close-out Netting in Shanghai FTZ.Hence,Close-out Netting can be executed in accordance with the master agreement between the parties.