FIA Seeks Additional Clarity on China’s “Historic” Futures Law

FIA is requesting additional clarity on settlement finality and proposing that the protections in the new futures law be further expanded.

FIA has submitted comments to China’s NPC (National People’s Congress) in support of the new draft Futures Law, saying the “historic” milestone will help to develop a more robust and liquid futures market for both Chinese and international customers.

At the end of April, a revised draft of the law was issued for consultation proposing to expand the scope to also cover derivatives beyond futures and raise penalties for violations.

In its response to the consultation, FIA offered observations and considerations for policymakers in China:

  • Finality of Futures Transactions – FIA strongly supports the introduction of a statutory settlement finality concept in the Futures Law, but seeks clarification on settlement/clearing finality, default management measures, impact of bankruptcy, and the bankruptcy of a futures clearing institution.
  • Client Clearing for Futures Transactions – FIA highlights the two different client clearing models used in the international markets, and seeks protection for the close-out netting arrangements between clearing participants and clients.
  • Central Clearing of OTC Derivatives Transactions – FIA requests that the protections for clearing and default management process for futures also be extended to central clearing of OTC derivatives.
  • Cross Border Application – FIA’s letter suggests the adoption of regulatory deference or substituted compliance between different jurisdictions in several areas.

FIA says its global membership is committed to working with the NPC, the CSRC (China Securities Regulatory Commission), the Chinese Futures Association and interested parties in the development and implementation of the new law.

The response letter is available here.

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