What Are the Basic Derivatives Regulations?

Derivative Products (Derivative Products) refer to new financial products derived from traditional basic financial instruments, such as currency, interest rates, stocks, etc., and they include futures, options and swaps.

Derivative products

(One)

It can be divided

Can be roughly divided into four categories, namely stocks, interest rates,

Financial liberalization

"Water can carry a boat, but it can also overturn a boat." Financial derivatives can avoid and hedge risks, increase the liquidity of financial markets, improve investment efficiency, and optimize resource allocation. However, the disasters caused by the failure of financial derivatives transactions are shocking and endless. In fact, losses, bankruptcies, and market turmoil are not the fault of the derivative products themselves, but are caused by the abuse and ineffective supervision of the derivative products. Therefore, it is imperative to take practical measures from multiple aspects and at different levels. To manage these risks.

(1) SPAN & a self-supervision and management of financial institutions. Financial institutions are investment entities that conduct financial derivative products transactions. First, the top management should make clear that the purpose of the transaction is to reduce diversified risks, expand profitability, improve operating efficiency and deepen financial development. An appropriate "macro-to-micro" control system should be established to specify the type of transaction, transaction volume and principal limit, and carefully choose the type of financial derivative products to be used. Second, we must strengthen internal control, strictly control transaction procedures, Separation of settlement rights and supervision rights requires strict and clear business authorization to increase penalties for unauthorized transactions; again, the establishment of a special risk management and supervision department to record, confirm, and test market transactions of transaction personnel , Evaluate, measure and prevent credit risks, market risks, liquidity risks, settlement risks, operational risks and legal risks faced in the process of financial derivative product transactions. This department should be directly responsible to the decision-making level, and report the relevant market conditions and the company's transactions in a timely manner.

(2) Internal supervision of the exchange system. The exchange is the organizer and market manager of derivatives trading. It formulates on-the-spot trading rules and monitors the market's business operations to ensure that transactions are conducted under open, fair and competitive conditions. It is essential to resist the risks of financial derivatives. Role. First, it is necessary to improve the trading system, reasonably formulate and adjust the margin ratio in a timely manner to avoid the risk of chain contract breach. Determine the position limit according to the actual capital of each institution, distinguish the difference between hedging, speculators, arbitragers and market makers, encourage hedging, appropriately suppress speculative components, and avoid insider trading and market manipulation; second, Establish a reasonable and strict clearing system, widely implement the mark-to-the-market system, strengthen the management of clearing, settlement and payment systems, coordinate the spot and futures derivative markets, domestic and overseas markets, and increase the market for derivative products. Liquidity and adaptability; again, strengthen financial supervision and information disclosure, reform traditional accounting methods and principles based on the characteristics of derivative products, and formulate unified data disclosure rules and procedures so that management and users can clearly and clearly grasp Risk exposure, formulate corresponding countermeasures, establish a reasonable and scientific risk control system to reduce and prevent the occurrence of risks.

(3) Macro-control and supervision of the central bank. As the maker of a country's monetary policy and the main executor of financial supervision, the central bank plays a pivotal role in the management of financial derivative product transactions. First, it is necessary to improve legislation, establish special comprehensive laws on financial derivative products, formulate unified standards for transaction management, and integrate transactions into an effective internal control system. Second, strengthen supervision of financial institutions engaged in financial derivative product transactions. Establish minimum capital for financial institutions engaged in transactions, determine risk exposure limits, conduct regular and irregular, on-site and off-site inspections of financial institutions, and form effective control and restraint mechanisms; again, regulate the operating behavior of financial institutions , Strictly distinguish between banking and non-banking operations, and control the degree of cross-financial business operations. At the same time, when a financial institution encounters a crisis due to an emergency, the central bank should promptly take corresponding rescue measures and quickly inject funds or temporarily intervene to avoid excessive shocks in the financial market. -US & International supervision and international cooperation. Financial derivatives transactions are flourishing worldwide. The transnational and super-governmental nature of transactions makes it impossible for a single country or region to manage financial derivatives, and it is impossible to effectively control the risks comprehensively. Therefore, financial derivatives are strengthened. International regulation and international cooperation have become the consensus of the international financial community and the financial authorities of various countries. After the Bank of Bahrain incident, the Bank for International Settlements (BIS) has begun to conduct comprehensive investigations and supervision of financial derivative product transactions, and strengthened supervision of the bank's off-balance sheet business capital adequacy. The Basel Accord supplemented D on the market risk ratio of financial derivatives in off-balance sheet business, calculated the potential risks of financial derivatives within the bank's capital, and increased the ability of commercial banks to prevent risks. It can be expected that the control and supervision of the risks of financial derivative products will become more comprehensive and effective in the future, so that the financial derivative products will develop healthily.