Futures law to make capital market more open

With China's top legislature adopting a new law on futures and derivatives trading on Wednesday, a more regulated and open capital market will take shape in China and it will be conducive to the sustained development of the real economy, experts said on Thursday.

The new law, which will take effect on Aug 1, is the first of its kind in the country since futures and derivatives trading commenced three decades ago. It was approved at a session of the Standing Committee of the National People's Congress.

Basic rules to govern futures trading, settlement and delivery are in the new law, said Wang Xiang, deputy head of the Office for Economic Law of the NPC's Legislative Affairs Committee.

The new law has also clarified the rules concerning the launch of new products, futures firms' business scope, and margin payment. The futures and derivative markets will thus give full play to their function of price discovery, risk management and resources allocation, which should spur the real economy, he said.

Different from the administrative or department regulations implemented in the past, the new law clarifies for the first time the basic rules for futures and derivative trading from the legal perspective. It has provided a legal framework and systematic arrangement for the healthy development of the futures and derivative markets, said Yu Hongzheng, partner of JunZeJun Law Offices.

Yang Delong, managing director of First Seafront Fund, said a growing number of mutual fund firms have received approval for futures and derivatives trading to meet growing investment demand. The new law will thus pave the way for the introduction of more mutual fund products focused on futures and derivatives trading.

The inclusion of derivative trading is a highlight of the futures and derivatives law, said Li Yating, vice-general manager of COFCO Futures. Rules related to derivatives such as forward contracts and swaps have all been included in the law, which will better guide the development of the derivatives market, she said.

By referring to widely adopted international practices in futures and derivative trading, the new law aims at creating a more efficient, equal, transparent and system-based environment, said Hou Xinqiang, general manager of Jinrui Futures.

More mature overseas investors and institutions will be attracted to the Chinese market while more domestic futures companies will be able to tap into overseas markets under the new law, he said.

Wang Huadong, chairman of Hongyuan Futures, said the new law specifies the requirements for cross-border supervision. This has laid the groundwork for two-way opening-up in the Chinese futures market. Futures companies can better use the onshore and offshore markets from now on, which will help bolster China's dual-circulation strategy, he said.

According to the China Futures Association, the trading volume topped a record 7.5 billion lots last year. Total trading value also hit a historic high of 581.2 trillion yuan ($90.8 trillion) in 2021. China has been the world's largest futures market for agricultural, nonferrous metals, coke and steam coal products, the association said.