The Dalian Commodity Exchange (DCE), a futures venue in northeast China, has published notes on the legislative work of the Chinese futures market, on how to deal with violation cases and other issues following the “Second Forum on Futures Legal Theories and Practices,” which was held in Dalian on August 14. Taking part in the forum were more than twenty representatives from the National People’s Congress (NPC) Financial and Economic Committee, the China Securities Regulatory Commission (SCRC), the relevant local courts, public security organs, arbitration institutions and law firms.
At the forum, a DCE official said that in recent years China’s futures market has seen sustained, healthy and rapid development, with the pace of industrial innovation accelerated, products and systems continuously improved, asset management, spot subsidiary and other new businesses advanced steadily, and the market’s capacity for serving the industries and the real economy constantly enhanced. The Communist Party of China (CPC) directive called “Some Opinions of the State Council on Further Propelling Sound Growth of the Capital Market” issued this year has charted new directions for the capital market including the futures market. In order to implement the spirit of the CPC Central Committee and stimulate the market vitality, the regulators have vowed to carry out the “regulatory transformation,” change the work concepts, and push forward streamlining and decentralization, as a result the futures market will experience development in leaps and bounds.
The DCE official anticipates that in the new market environment, the market activities violating laws and regulations will present some new situations and problems. “How to respond effectively, especially how to give full play to the role of the forefront market supervisors and strengthen market supervision, is a new task for us.” The official also said that DCE will strengthen contact with the legal profession in various ways, listen to the opinions and suggestions of experts and scholars from all walks of life, contribute efforts in the improvement of the market laws and regulations, intensify self-regulation and step up the crackdown on violations. He also hoped that the legal profession would pay constant attention to the development of the futures market and be more active in participating in the legal construction of the futures market.
According to an official of the Legal Department of DCE, China’s early futures market recorded cases of violations of laws and regulations mainly in market manipulation, fraud, misappropriation of clients’ margins and other formats. Furthermore, in recent years, with China’s futures market developing steadily and the regulatory measures increasingly improved, the violation cases have seen changes in format and characteristics, mainly in the form of manipulating the settlement price of the delivery month and bucketing and transferring funds. However, some problems are noteworthy in the current judicial practice in the Chinese futures industry, for example, research has yet to be deepened in the new type cases such as market manipulation and the cross market insider trading. In addition, the link of self-discipline management with administrative penalties and criminal penalties and other problems still need to be further addressed.
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Representatives from the Chinese judicial system said that one of the important reasons for the relatively standardized overall futures market and comparatively few dispute cases at present, is that the market has formed a set of rigorous rules and systems and the “five in one” regulatory system, thus effectively preventing the risks. But the futures industry should not take it lightly the judicial representatives said, as behind the appearance of relatively few market dispute cases, the relevant disputes may have shown up in other forms in other processes, to which we should pay special attention; from another perspective, it also reflects the urgent demand for the futures market to accelerate the legal construction so as to make all futures market entities secure the laws to abide by.
At the forum, legal experts also discussed the identification of various violations of law enforcement on the futures market, the problems in self-regulation for the exchanges and the cases in practice. The experts pointed out that the futures dispute cases are highly professional, requiring the judicial circle’s attention and the deepening of research in the futures industry. In the investigation processes, trial and review of the violation cases, full play should be given to the role of the external experts and lawyers and the CSRC so as to improve efficiency in the handling of the cases and safeguard the market equity. The cases beyond the scope of self-regulation of the exchanges should be transferred to the CSRC and the public security organs, and smooth communication and coordination mechanisms should be established so as to effectively protect the legitimate rights and interests of investors.
An official of the Office of the NPC Financial and Economic Committee and the working group for the “Futures Law” have reported the current progress in the drafting of the “Futures Law,” promising to listen to the opinions and suggestions of the legal profession in futures practices for reference in making the Futures Law.
Last May, the DCE held the first forum on futures legal theories and practices, setting up a platform for in-depth exchanges of the futures market in Dalian and the legal profession, energetically boosting DCE’s work in self-regulation. On the basis of the last forum, this event focused on the identification of the typical violations on the futures market, handling procedures, the linkage mechanism of self-regulation, administrative enforcement of law and criminal justice and other aspects. The DCE says that having increased the relevant parties’ understanding of the handling of the violation cases, self-regulation and other issues on the futures market, it has facilitated the legal construction of the futures market in China.