Derivatives 2025

CHINA Law and Practice Contributed by: TieCheng Yang, Yin Ge, Lin (Avery) Huang and Weijun (Elliot) Yi, Han Kun Law Offices

FX, bond forward or commodity swap – since clearing brokers operate under SHCH’s unified central clearing framework. To facilitate the central clearing of the Northbound Swap Connect transactions, NAFMII formulated the Swap Connect Cleared Derivatives Agreement, under which both parties agree to take reasonable steps to clear eligible Swap Connect transactions. The onshore parties to this agreement are market makers in the interbank derivatives market who are also clear - ing participants of SHCH. In negotiating clearing documentation, the key issues typically concern account, margin arrangements, fees, effectiveness and termination of agreement, as well as default-related liabilities. 4.3 Opinions and Other Documentation Issues Currently, there is no regulatory requirement in China that requires a legal opinion for conducting derivatives transactions. 5. Enforcement Trends 5.1 Regulator Priorities and Enforcement Trends CSRC: Prevent Regulatory Evasion Through Derivatives to Strengthen Capital Market Governance Over the past year, China’s capital markets have expe - rienced rapid growth. In 2024, China’s major stock indices had seen significant gains, for example, the benchmark Shanghai Composite Index rising by 12.67%, and this growth momentum has continued into 2025. In line with this favourable trend and to maintain it, the central government, at its meeting on 30 July 2025, placed special emphasis on “consoli - dating the positive trend of stabilisation and recovery of capital markets” and “consolidating the positive trend of stabilisation and recovery of capital markets”. Against this backdrop, one of the major focuses of CSRC has been strict law enforcement to promote

the development of the capital markets, particularly in preventing market participants from disrupting the financial order through derivatives. CSRC specifically disclosed two enforcement cases in 2024 involving derivatives: one concerning controlling sharehold - ers circumventing restrictions on share reductions through securities lending and derivatives, and the other involving insider trading conducted via OTC options. CSRC is expected to continue to strengthen the super - vision of the derivatives market in 2025, as the Deriva - tives Trading Measures have already been included as a priority project targeted for release within the year. PBoC: Foster the Regulation and Development of Financial Infrastructure In August 2025, PBoC issued regulatory measures on financial infrastructures, which include provisions on, among other things, the registration and depository system, the clearing and settlement system, the pay - ment system and trade repositories. The measures also allow overseas financial infrastructures to con - duct business within China on the condition that their regulatory authorities have signed a memorandum of understanding with the relevant Chinese regulators. It is anticipated that PBoC will continue its focus on the compliance and development of financial infrastruc - ture based on public comments made by PBoC offi - cials, who have indicated PBoC’s intent to establish trade repositories for the interbank market. PBoC stated that, going forward, it will work with CSRC to continue strengthening the development and co-ordinated oversight of financial market infrastruc - tures, with the aim of establishing an advanced and reliable financial infrastructure system. Advancing the comprehensive development of finan - cial market infrastructures will also mean that Chinese regulators will have greater authority and stronger enforcement capabilities over the operation of the financial and derivatives market. In this regard, we may expect that in the future, the PRC financial and derivatives market will operate in a more orderly man - ner and under closer regulatory supervision.

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