FIA supports China’s historic Futures Law

FIA’s comments praise framework and suggest enhancements

27 May 2021

Singapore—FIA today submitted comments to China’s National People’s Congress in support of the new draft Futures Law, noting this historic milestone will help to develop a more robust and liquid futures market for both Chinese and international customers. For many years, FIA has advocated for the passing of a futures law in China as a vital step in the development and growth of China’s markets. These markets already rank among the largest in the world in terms of trading volume, but they lack certain legal standards that are critical for deeper institutional participation.

“FIA is pleased to support the draft Futures Law, which will provide a critical legal foundation for the continued growth of these global markets and their participants,” noted FIA President and CEO Walt Lukken. “The draft Futures Law contains important legal protections and requirements that are needed for the resilience and integrity of these markets, including the finality of futures transactions and enforceability of close-out netting.”

FIA’s consultation letter praises these efforts and offers some observations and considerations for policymakers in China, including:

  • Finality of Futures Transactions – FIA strongly supports the introduction of a statutory settlement finality concept in the Futures Law, but seeks clarification on settlement/clearing finality, default management measures, impact of bankruptcy, and the bankruptcy of a futures clearing institution.
  • Client Clearing for Futures Transactions – FIA highlights the two different client clearing models used in the international markets. FIA also seeks protection for the close-out netting arrangements between clearing participants and clients.
  • Central Clearing of OTC Derivatives Transactions – FIA requests that the protections for clearing and default management process for futures, including settlement finality, close-out netting, liquidation of position and disposal of non-cash collateral and the application of margin, also be extended to central clearing of OTC derivatives.
  • Cross Border Application – FIA’s letter respectfully suggests the adoption of regulatory deference or substituted compliance between different jurisdictions in several areas. 

FIA’s global membership is committed to working with the National People’s Congress, the China Securities Regulatory Commission, the Chinese Futures Association and interested parties in the development and implementation of this important new law.

FIA would also like to thank the China Securities Regulatory Commission as well as the Chinese Futures Association for their advice, guidance, and insight over the past decade. Their engagement with FIA’s members has been instrumental in the advancement of the global exchange traded derivatives industry.

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