Every reporter: Xiao Shiqing Every editor: Liao Dan
On December 3, the central bank’s official website announced that in order to regulate the derivatives business, promote the healthy development of the domestic derivatives market, protect the legitimate rights and interests of all parties, and prevent systemic risks, the central bank jointly drafted the ” Guiding Opinions on Promoting the Standardized Development of Derivatives Business (Draft for Soliciting Opinions)” (hereinafter referred to as the “Guiding Opinions”).
Article 8 of the “Guiding Opinions” states that financial institutions should adhere to the principle of developing derivatives business mainly for non-individual investors, and strictly implement qualified investor standards reviews. Bancassurance institutions shall not directly conduct derivatives transactions with individual customers through the counter, and shall not provide enterprises with transaction services for non-hedging purposes. If other financial institutions really need to provide derivatives trading services for individual customers, they should formulate more prudent participation requirements for individual customers.
Wang Hongying, Dean of the China (Hong Kong) Financial Derivatives Investment Research Institute, told the “Daily Economic News” reporter that the further opening of my country’s capital market to the outside world has also promoted the development of the financial derivatives market to a certain extent. The hierarchical design of the capital market, that is, matching different investment groups from the risk attributes of different financial products, is conducive to financial derivatives serving the real economy.
Pay attention to the protection of individual customers
The “Daily Business News” reporter noted that the “Guiding Opinions” mainly contained the following four items. One is to unify the definition and classification of derivatives; the other is to focus on counter-to-customer derivatives business to strengthen investor protection; and the third is to strengthen investor protection. Financial institutions are required to strengthen internal control management and consolidate the micro-foundation for the standardized development of derivatives business; the fourth is to make arrangements for the division of supervision and coordination in accordance with the responsibilities of financial management departments.
It is worth noting that in terms of strengthening investor protection, the “Guiding Opinions” require that financial institutions conduct counter-to-customer derivatives business only for qualified investors, and further regulate the relevant suitability assessment, risk disclosure, and sales The requirements of management and internal management also encourage them to refer to the rules of the organized market to conduct transaction settlements to prevent risks.
Among them, special attention is paid to the protection of individual customers. Financial institutions are required to conduct derivatives business mainly for non-individual investors. Bancassurance institutions are prohibited from directly conducting derivatives transactions with individual customers through counters. Other financial institutions must make changes to provide services to individual customers. In order to prudently participate in the requirements, the relevant evaluation and sales requirements are also stricter.
Wang Hongying told reporters that my country’s financial market will be fully opened to the outside world in 2020. Under this background, my country’s financial derivatives market is showing a rapid development trend, and various innovative products are emerging one after another. At the same time, due to the lack of experience in derivatives management by some financial institutions, and the lack of professional skills of some investors, their inadequate knowledge of products has also exposed some risks.
Wang Hongying told the reporter of “Daily Economic News” that this consultation is to further regulate the operating rules and detailed rules of financial institutions on the premise of protecting the interests of investors, making the development of the financial derivatives market more effective and better to support The development of the physical industry serves investors.
Strengthen the internal control management requirements of the organization
The reporter learned that the original intention of derivatives was to serve as a tool for the real economy to conduct risk management on commodity prices. Since its development, its targets have covered stock indexes, interest rates, credit, foreign exchange, etc. Due to the wide variety of derivatives involved and complex trading rules, they are relatively niche. But because of its “leverage” function is hyped, it often leads to risk cases. This serves as a warning for ordinary individual investors to invest in derivatives.
Regarding the reasons for issuing the “Guiding Opinions”, the drafting manual pointed out: “In recent years, my country’s derivatives market has gradually developed, and a derivative market system including the exchange market, the inter-bank market, and the customer counter market has initially formed. As well as the regulatory framework that combines institutional supervision with functional supervision and macro-prudential management, the market function is increasingly brought into play, and the function of serving the real economy is effectively improved. But on the whole, the system rules need to be improved, the regulatory standards need to be unified, and the professional management capabilities of financial institutions need to be To improve, the management of qualified investors needs to be strengthened, the construction of various infrastructures related to derivatives trading activities needs to be strengthened, there are weak links in financial management, and risk events occasionally occur.”
Therefore, the Central Bank, in conjunction with the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange, jointly formulated the “Guiding Opinions”. While consolidating existing regulatory rules, it further complements regulatory shortcomings, strengthens institutional internal control management requirements, and strengthens investor protection to promote Standardized and healthy development of derivatives business.
In addition, the “Guiding Opinions” apply to domestic and overseas licensed legal person financial institutions established with the approval of the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission, including domestic and overseas branches of bancassurance institutions. At the same time, financial institutions need to perform necessary reporting or approval procedures to carry out cross-border related derivatives business, and strictly control risks. In principle, bancassurance institutions must not conduct cross-border non-hedging transactions of over-the-counter derivatives.
Wang Hongying said that the four departments soliciting opinions on the standardized development of derivatives business are actually affirmation of the development of China‘s derivatives market, ensuring the orderly and efficient development of China‘s financial derivatives market, and better risk management for the development of the physical industry. Function. At the same time, for qualified investors, the scope and channels of investment have also been expanded.
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