Berry Fong‐Chung Hsu

Derivative markets in China: Guest editors' introduction

The regulatory framework for the derivatives markets in China consists of national legislation, rules, and regulations made by the China Banking Regulatory Commission (CBRC), the China Securities Regulatory Commission (CSRC), and the guidelines of the Supreme People’s Court. The CBRC has jurisdiction over the financial institutions engaging in trading financial derivatives. In 2004, it promulgated the Interim Measures for the Business Management of Derivative Product Transactions of Financial Institutions (Interim Measures), as amended in 2006. The Interim Measures is not a comprehensive rule regulating financial derivatives, rather it sets out the requirements for major participators of financial derivatives markets, that is, financial institutions. It also provides the requirements for market entry, risk management, and penalties for breach of its provisions. Its 2006 amendment further provides detailed requirements and the procedures for market entry into the derivatives markets. This amendment also focuses on risk management. It states that the board of directors must assess the risk management policies and procedures annually, the managers must provide the methodologies and indicators of risk calculations, and the persons responsible for risk management must be separated from those responsible for financial derivatives trading.