From last year’s crude oil treasure to the option products developed on some platforms recently, derivatives have continued to emerge. Many investors may only see the benefits but have a little understanding of the risks. On December 3, the central bank, the China Banking and Insurance Regulatory Commission and other four departments issued the “Guiding Opinions on Promoting the Standardized Development of Derivatives Business (Draft for Comment)” to strengthen investor protection and propose a prohibitionBankinsuranceInstitutions directly conduct derivatives transactions with individual customers through the counter. The analysis believes that in the future, my country’s financial derivatives market will move forward in an orderly manner under regulatory standards.
There are 18 articles in the draft for comments, and the main content includes four aspects, including unifying the definition and classification of derivatives; focusing on counter-to-customer derivatives business, strengthening investor protection; requiring financial institutions to strengthen internal control management and consolidating derivatives business standards Micro-foundation for development; make arrangements for the division of supervision and coordination in accordance with the responsibilities of the financial management department.
It is understood that the original intention of derivatives is to serve as a tool for the real economy to conduct risk management on commodity prices. Their transactions are based on three basic logics: speculation, hedging, and arbitrage. For example, due to the sharp fluctuations in the prices of upstream raw materials this year, many listed companies have hedged risks by developing derivatives investment business.
“Starting in 2020, ininterest rateIn the context of marketization and further opening of capital accounts, coupled with the advent of a low-carbon and environmentally friendly economy, the price volatility of various financial assets has increased sharply, and various financial products derived from these original assets have also continued to emerge. Wang Hongying, Dean of China (Hong Kong) Financial Derivatives Investment Research Institute, told the Beijing NewsshellFinancial reporters said that financial innovation has further prospered the development of my country’s capital market, but many individual investors are limited by their professional capabilities and cannot adapt to the trading of these derivative financial products.
For example, in the crude oil storm last year, a large number of individual investors lost money; this year, there are also cases of loss-making listed companies that started derivatives trading. “The derivatives market is a zero-sum market after removing transaction costs, and both parties earn and compensate each other. From the point of view of profit and loss, it is usually the institutions that make the money from the retail investors, and the professional ones make the unprofessional money.” CCB Futures insiders In an article published in “China Foreign Exchange”, it concluded.
This consultation draft is clear, unifies the definition and classification of derivatives, and refines the classification according to on-exchange and off-exchange (including organized over-the-counter markets and one-to-one counter transactions), and focuses on regulating OTC derivatives.
In terms of strengthening investor protection, special attention is paid to the protection of individual customers, and financial institutions are required to conduct derivatives business mainly for non-individual investors.BankinsuranceInstitutions directly carry out derivative transactions with individual customers through the counter, and other financial institutions must formulate more prudent participation requirements to provide services to individual customers, and relevant evaluation and sales requirements are also stricter.
“From the above background, first of all, my country has further deepened the all-round opening of the capital market, especially the development of financial derivatives markets is encouraged by the country. Second, the country has implemented a hierarchical design in the capital market from the risk attributes of different financial products. To match different investment groups and truly allow financial derivatives to serve the real economy.” Wang Hongying said that in the future, my country’s financial derivatives market will move forward in an orderly manner under regulatory standards.
(Source: Beijing News)
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