Research On The Regulation Of Credit Default Swaps In China

Credit default swaps(CDS),is a type of credit derivative which is common in international capital markets.CDS was originated from the United States and once considered as an important instrument in western developed capital market.However,it played a negative role in the financial crisis of 2008 and was therefore subject to strict regulation after the subsequent financial regulatory reform.In 2010,CDS was introduced into the inter-bank market in China,and in 2019,CDS was officially admitted into the exchange market.Although there was no significant risk event took place in CDS market over the last decade,it is to an large extent because CDS market is still an immature market under China's strict regulatory system.As for the regulation of CDS,too strict regulatory force will lead to the failure for CDS to fulfill its functions,while too loose regulation will cause tremendous risk to the market.Thus,it is of great significance to establish CDS's regulatory system in China,either from the perspective of fully utilizing of CDS,or preventing the possible risks brought by CDS.This essay is divided into three chapters.Based on the introduction of the fundamental theory of CDS regulation,this paper will sort out China's current regulatorysystem and target the problems therein.Through the introduction and analysis of CDS's regulation from other countries,this paper will forward suggestion in the manner of establishing such system.The first chapter of this paper is divided into three sections,respectively,the basic theory of CDS,the analysis of the necessity for the regulation of CDS,and the discussion with respect to the regulation approach.The first section introduces the basic theory of CDS.First of all,the concept and origin of CDS are briefly introduced to lay the foundation for the following analysis.Secondly,the trading mechanism of CDS and related professional terms will be explained.Finally,from the functional characteristics of CDS,combined with the existing market environment in China,this paper analyzes the necessity of developing CDS.The second section will introduce three kind of risks,which are systemic risk in the market,default risk of the seller and moral risk of the purchaser,which shows the great significance of CDS's regulation.In section three it will be discussed whether the legal nature of CDS is contract,insurance or securities,and point out the important role of regulatory value orientation in determining the regulatory approach of CDS.The second chapter is divided into two sections,which introduces the history of CDS in China,the current situation of CDS regulation and also the problems arouse thereof.In the first section,it introduces the origin and current situation of two “Chinese version” CDS instruments,namely the credit risk mitigation instrument between the inter-bank market and the credit protection instrument developed in the exchange.The second section first sorts out the current regulation of CDS in China,then summarizes and analyzes on the problems in regulation system,including the current regulation mode and specific regulatory rules of market entry system,the information disclosure and reporting system and central clearing system respectively.The third chapter of this paper is divided into four sections.This chapter targets the problems pointed in chapter two and combined the foreign advanced regulationexperience,aiming at putting forward suggestion in constructing the CDS regulatory system,specifically,the regulatory mode,the market entry system,the information disclosure and reporting system and central clearing system.