Derivatives 2025

CHINA Trends and Developments Contributed by: Tao (Andy) Qin, Yanhua (Xavy) Xu, Ran (Addie) Cheng and Tianbing (Yasmin) Zhou, DeHeng Law Offices

hours and settlement methods to accommodate overseas investors. This not only improves risk management but also provides a better experience for overseas investors. • China’s financial derivatives are gaining pricing power alongside the rising international status of the renminbi. To sum up, China’s futures market is institution- based, deepening its role in serving the real economy and internationalisation through multidimensional enhancement, and steadily moving towards high- quality development. Legislative Framework and Developments of Futures and Derivatives Markets in China As the industry develops, China’s futures and deriv - atives markets have seen a refinement of the legal framework. The Futures and Derivatives Law, enacted in 2022, serves as a fundamental law and establishes the overall regulatory framework for the futures and derivatives markets. Following the enactment of the Futures and Derivatives Law, a series of detailed rules, regulations and measures have been successively established. The 2025 Annual Legislative Work Plan issued by the China Securities Regulatory Commission (CSRC) out - lines the primary objectives for this year’s legislative work: strengthening the supervision of capital market- related behaviours, regulating capital market-related entities and advancing law-based administration. Regarding strengthening capital market supervision, one of its “annual key projects” is the formulation of the Measures for the Supervision and Administra - tion of Derivatives Trading. Regarding enhancing the regulation of capital market entities, its key project is the revision of the Measures for the Supervision and Administration of Derivatives Trading and the Measures for the Supervision and Administration of Futures Companies are practical choices for the capital market According to the Futures and Derivatives Law, the term “trading in futures” refers to trading activities that take futures contracts or standardised option con - Administration of Futures Companies. The Measures for the Supervision and

tracts as their subject matter, while the term “trading in derivatives” refers to trading activities other than trading in futures that take swap contracts, forward contracts, non-standardised option contracts or port - folios thereof as their subject matter. Thus, trading in futures is characterised by standardisation, specific trading venues and statutory trading rules. Since the scale of the OTC market is far larger than that of the on-exchange market, trading in derivatives is char - acterised by flexibility and a high degree of contract freedom. During the draft period, the Futures and Derivatives Law was known as the Futures Law and did not include “Derivatives” in its name, largely due to the fact that the derivatives OTC market is huge, with obvious individualised characteristics of transactions, which made it difficult to regulate trading behaviour while continuing to retain flexibility and innovativeness in the legislation. However, to recognise the distinct differences between the derivatives market and the on-exchange futures market, and the large size of the derivatives OTC market, derivatives were finally included in the name at the insistence of both aca - demics and practitioners. However, the Futures and Derivatives Law only pro - vides basic principles for the derivatives market. This has led to frequent issues in the derivatives market, attributable to factors such as inconsistent regulatory standards, low hierarchical effectiveness of rules, urgent need for clarification on rule content, and lack of co-ordination in monitoring systems. Furthermore, under the overarching law of the Futures and Deriva - tives Law, the main rules governing the derivatives business are self-regulatory rules issued by the Secu - rities Association of China (SAC) – such as the Admin - istrative Measures for the OTC Option Business of Securities Companies and the Administrative Meas - ures on Income Swap Business of Securities Com - panies – a situation that has resulted in a gap in leg - islation. Against this backdrop, the Measures for the Supervision and Administration of Derivatives Trad - ing, as a refinement and supplement to the derivatives market’s trading rules at the departmental regulation level, fulfil an urgent need and represent a practical choice for the capital market.

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