Equivalence Recognition System In Transnational Securities Exchange Regulation

Since the 1980 s,the international securities market has gradually shown four new characteristics-globalization,non-intermediary,transnationalization and electronicization.The disruptive revolution in the economic market has driven the reforming storm of related legal supervision.However,due to the hysteresis nature of the law,countries didn't pay too much attention ahead in extraterritorial regulation for controlling the gradually expanding systemic risks.Therefore,financial crises whose primary causes are regulatory out-of-control and regulatory gaps went virus.After suffering from several financial turbulences,countries began to think about measures to prevent systemic risks.The risk entailed by cross-border securities exchange has become a focus of securities trading regulation in various countries.In order to protect the interests of domestic investors and maintain market fairness and stability,many countries like EU and the United States have chosen to extend their securities regulatory jurisdiction to transactions or entities outside the scope of sovereignty.For example,both the US Dodd-Frank Act and the European Union's European Markets Infrastructure Regulation provide over-the-counter derivatives regulation with broad extraterritorial jurisdiction.Since then,in the field of cross-border securities exchange regulation,the regulatory conflict caused by repeated supervision has been deadlocked,increasing many uncertain factors to the international securities exchange market.Under the circumstance of increasing regulatory barriers upon each other and the interlacing cross-border supervision,the frictions and conflicts of this regulatory game gradually transform into a negative regulatory competition,raising compliance costs of market participants,adversely affecting the international securities market and international relations between various countries.At the same time,the launching preparation of the international board or science and technology board of China's securities market,the begin of a centrally clearing mechanism for OTC derivatives,and the identification of the Qualifying Central Counter Parties have made China inevitably an important part of extraterritorial securities regulation.In the process of promoting the construction of the Belt and Road and coordinating the Guangdong-Hong Kong-Macao Greater Bay Area,China must also encounter the coordination of securities exchange regulation with other countries.In order to solve this dilemma and realize the unification of international securities exchange regulation,there have been two kinds of transitional modes in practice-financial soft law and minilateralism.However,the financial soft law is too abstract and has not any international organizations or institutions with hard binding force,entailing no guarantee in law enforcement and supervision;while the minilateralism is too much elite political and unilateralismatic,causing a lot of denunciation.In the search for solutions to transnational securities exchange regulatory conflicts,some countries have gradually found a soft and feasible way-the equivalence recognition system,which can be seen as an extension of the national treatment principle.Its essence is the recognition of regulatory missions or regulatory results.Equivalence recognition system refers to a country/area regulator's assessment and comparison of the regulation of another country/area.If the country/area has the same effect as domestic regulation in certain regulatory rules and its implementation,the regulator will admit the foreign country/area's regulatory rules or supervision results having the effectiveness within the territory of the regulator's country/area,thereby facilitating market participants who meet the regulatory rules of the foreign country/area or obtain regulatory results from the foreign country/area to exempt domestic regulatory rules.In fact,equivalence recognition or similar arrangements have long been adopted in areas such as international cargo regulation,international financial services regulation,and the application of international accounting standards.In the current transnational securities exchange regulation,US registration exemption for overseas stock exchanges and the substituted compliance of OTC derivatives are both the practical products of the equivalence recognition system.EU has similar regulations for its member states as well.In 2013,the G20 St.Petersburg Summit announced support for equivalence recognition arrangements such as substituted compliance,in order to strengthen future regulatory cooperation.The practice of the equivalence recognition system can be seen as a periodical result of international regulatory cooperation.Countries or areas can resume or continue communication and cooperation between countries on the basis of the formation of the equivalence recognition network,pursuing the unification of international securities supervision.Compared with other regulatory coordination measures,the equivalence recognition system has unique advantages.However,aiming at ensuring the effective implementation of this system,regulators must overcome problems like inherent limitations of cross-border supervision,the uncertainty of both parties,the faults of international supervision,etc.Accordingly,this paper takes the regulation of cross-border securities transactions as the background,systematically combs and analyzes the equivalence recognition system's concept,classification,theoretical basis,procedures and so on,focusing on the classification and analysis of identification standards on equivalence.The paper also proposes some legal solutions to overcome the defects and risks of the system.The aim is to provide a reference for China to respond to the equivalence recognition arrangements of securities exchange regulation by other countries or regions as well as to promote regulatory coordination and cooperation with other countries.To be specific,this paper is depicted in the following 4 chapters:The first chapter mainly talks about the dilemma and breakthrough of cross-border securities exchange regulation.Firstly,the paper elaborates the deadlock of international regulatory conflicts caused by the expansion of extraterritorial securities exchange supervision and analyses the limitations of the two methods,financial soft law and minilateralism,in order to introduce the third solution-the equivalence recognition system of transnational securities exchange regulation.This chapter systematically expatiates the concept,classification,theoretical basis,basic characteristics,superiority and procedure of the equivalence recognition system,laying a foundation for a proposal of solving the defects and risks found in the following text.The second chapter discusses the identification criteria in the equivalence recognition system under the situation of the cross-border securities transaction supervision.This chapter separately discusses the equivalence criteria for two kind equivalence recognition model-the bilateral model and the multilateral model.it focuses on the bilateral equivalence recognition model.In this model,the two generations of substituted compliance represented by the United States show the change from the rule-based equivalence to result-based one.It also includes some examples of specific recognition standards or practice for analysis.On the other hand,the recognition criteria under the multilateral equivalence recognition model are divided into two cases: the criteria of the multilateral framework and the one of the quasi-multilateral network.The EU is a typical representative of the multilateral framework.It adopts a minimum standard in dealing with regulatory conflicts between member parties,and a similar solution to the bilateral model when dealing with conflicts with third countries.In addition,when actively responding to the equivalence recognition of Europe and America,Hong Kong becomes a pioneer of quasi-multilateral chain-type presumption model,promoting the formation of an equivalence recognition network in the world.The third chapter mainly analyses the defects and risks of the equivalence recognition system under the situation of the cross-border securities transaction regulation at present,including the inherent limitations of cross-border supervision,the uncertainty of the equivalence recognition,and the fault between international supervision,etc.In the fourth chapter,the solution recommendations are designed for overcoming each defect and risk of the third chapter.It proposes the supervision path from the perspective of China's application,and contributes a small force to China's active participation in the international securities trading regulatory reform and in the unification of the international securities exchange supervision.