Futures and Derivative Law of the People's Republic of China

Futures and Derivative Law of the People's Republic of China

Order of the President of the People's Republic of China

(No. 111)

The Futures and Derivative Law of the People's Republic of China, as adopted at the 34th Session of the Standing Committee of the Thirteenth National People's Congress of the People's Republic of China on April 20, 2022, is hereby issued, and shall come into force on August 1, 2022.

Xi Jinping, President of the People's Republic of China
April 20, 2022

Futures and Derivative Law of the People's Republic of China
(Adopted at the 34th Session of the Standing Committee of the Thirteenth National People's Congress on April 20, 2022)

Table of Contents
Chapter I General Provisions
Chapter II Trading in Futures and Derivatives
Section 1 General Rules
Section 2 Trading in Futures
Section 3 Trading in Derivatives
Chapter III Futures Settlement and Delivery
Chapter IV Futures Traders
Chapter V Futures Trading Institutions
Chapter VI Futures Trading Venues
Chapter VII Futures Clearing Institutions
Chapter VIII Futures Service Institutions
Chapter IX Futures Associations
Chapter X Supervision and Administration
Chapter XI Cross-border Trading and Regulatory Cooperation
Chapter XII Legal Liability
Chapter XIII Supplemental Provisions

Chapter I General Provisions

Article 1 This Law is enacted for the purposes of regulating trading in futures and derivatives, protecting the lawful rights and interests of all parties, maintaining the market order and protecting the public interest, promoting the development of the futures market and derivative market to serve the national economy, preventing and dissolving financial risks, and maintaining the security of the national economy.

Article 2 This Law shall apply to trading in futures and derivatives and relevant activities within the territory of the People's Republic of China.
Where any trading in futures or derivatives and relevant activities outside the People's Republic of China disrupt the order of the domestic market of the People's Republic of China and cause any damage to the lawful rights and interests of domestic traders, it shall be handled, and the violators shall be held legally liable according to the applicable provisions of this Law.

Article 3 For the purposes of this Law, “trading in futures” means the trading activities that take futures contracts or standard option contracts as the subject matter of transactions.
For the purposes of this Law, “trading in derivatives” means the trading activities other than futures trading, which take swap contracts, forward contracts, and non-standard option contracts, as well as their portfolios as the subject matter of transactions.
For the purposes of this Law, “futures contract” means a standard contract uniformly prepared by a futures trading venue under which a certain quantity of the subject matter shall be delivered as agreed upon on a given futures date at a specified location.
For the purposes of this Law, “option contract” means a standard or non-standard contract under which the buyer is entitled to buy or sell the subject matter (including a futures contract) as agreed upon at a specific price on a given futures date.
For the purposes of this Law, “swap contract” means a financial contract under which the specific subject matter shall be exchanged as agreed upon on a given futures date.
For the purposes of this Law, “forward contract” means a financial contract other than a futures contract, under which a certain quantity of the subject matter shall be delivered as agreed upon on a given futures date at a specified location.

Article 4 The state supports the sound development of the futures market, and shall play the functions of the futures market in discovering prices, managing risks, and allocating resources.
The state encourages the use of the futures market and derivative market to engage in hedging and other risk management activities.
The state shall take measures to promote the development of the futures market and derivative market of agricultural products and guide the production and operation of domestic agricultural products.
For the purposes of this Law, “hedging” means the trading in futures and derivatives by traders in order to manage the risks arising from the change in value such as their assets and liabilities, which are basically consistent with the aforesaid assets and liabilities, among others.

Article 5 The futures market and derivative market shall establish and improve the system and mechanism for monitoring, controlling, dissolving, and disposing of risks, restrict excessive speculation according to law, and prevent systematic market risks.

Article 6 The trading in futures and derivatives shall comply with laws and administrative regulations and the relevant provisions of the state, follow the principles of openness, fairness, and impartiality, and fraud, market manipulation, and insider trading shall be prohibited.

Article 7 The parties to the trading in futures and derivatives shall have equal legal status, and comply with the principles of free will, onerousness, and good faith.

Article 8 The futures regulatory agency of the State Council shall conduct the centralized and unified supervision and administration of the futures market nationwide in accordance with the law. If any provisions issued by the State Council provide otherwise for the supervision and administration of interest rate and exchange rate futures, such provisions shall prevail.
The derivative market shall be subject to the supervision and administration of the futures regulatory agency of the State Council or the department authorized by the State Council according to the division of duties.

Article 9 Futures and derivative industry associations shall conduct self-regulation in accordance with the law.

Article 10 The audit authorities of the state shall conduct the auditing of futures trading institutions, futures trading venues, futures clearing institutions, and the futures regulatory agency of the State Council in accordance with the law to perform their supervisory functions.

Chapter II Trading in Futures and Derivatives

Section 1 General Rules

Article 11 Futures shall be traded at legally formed futures exchanges or other futures trading venues legally approved by the futures regulatory agency of the State Council to trade in futures (hereinafter collectively referred to as “futures trading venues”) in the form of open and centralized trading or other forms approved by the futures regulatory agency of the State Council.
No futures may be traded outside futures trading venues.
Derivatives may be traded in the form of agreement-based trading or other trading forms prescribed by the State Council.

Article 12 No entity or individual may manipulate the futures or derivative market.
Manipulation of the futures market to affect or attempt to affect the trading price or volume of futures by any of the following means shall be prohibited:
(1) Alone or by conspiracy, concentrating advantages in terms of funds, holding of positions, or information to purchase or sell futures jointly or continuously.
(2) Colluding with any other person to trade in futures mutually at the time and price and in the manner as agreed upon in advance.
(3) Trading in futures between accounts under the actual control of the entity or individual.
(4) Inducing traders to trade in futures, by using false or uncertain material information.
(5) Placing and canceling orders frequently or in large numbers, not for the purpose of the consummation of trades.
(6) Providing the public with any evaluation, forecast, or investment advice on the relevant trading in futures or the subject matter of the contract, or conducting operations in the opposite direction or related operations.
(7) Hoarding goods in order to influence futures market prices.
(8) Evading position limit by unjustifiable means and forming position advantage in the delivery month or nearby delivery month.
(9) Manipulating the futures market by activities on the relevant market.
(10) Otherwise manipulating the futures market.

Article 13 Insiders who have access to insider information in connection with trading in futures or derivatives or persons who have illegally obtained insider information shall be prohibited from trading in futures or derivatives before the disclosure of insider information, explicitly or implicitly instructing any other person to trade in futures or derivatives relating to insider information, or divulging insider information.

Article 14 For the purposes of this Law, “insider information” means non-public information which may significantly affect the futures or derivative trading prices.
Insider information on futures trading shall include:
(1) policies, information, or data that are being formulated or have not been issued by the futures regulatory agency of the State Council and other relevant departments and may significantly affect futures trading prices;
(2) decisions made by futures trading venues and futures clearing institutions, which may significantly affect futures trading prices;
(3) funds and transactions of members of futures trading venues and traders;
(4) information on major abnormal transactions on relevant markets; and
(5) other information that has a significant impact on the futures trading price as prescribed by the futures regulatory agency of the State Council.

Article 15 For the purposes of this Law, “insiders who have access to insider information” means the entities and individuals that, by virtue of their operating status, management position, supervisory role, or advantages in position, among others, have access to or obtain insider information.
Insiders who have access to insider information on futures trading shall include:
(1) relevant personnel of futures trading institutions, futures trading venues, futures clearing institutions, and futures service institutions;
(2) staff members of the futures regulatory agency the State Council and other relevant departments; and
(3) other entities and individuals that may obtain insider information as prescribed by the futures regulatory agency of the State Council.

Article 16 No entity or individual shall fabricate or disseminate false or misleading information to disrupt the futures market and derivative market.
Futures trading institutions, futures trading venues, futures clearing institutions, futures service institutions, and their practitioners, venues and institutions that organize or conduct derivative trading and their practitioners, as well as futures and derivative industry associations, the futures regulatory agency of the State Council, the department authorized by the State Council and their staff members shall be prohibited from misrepresentation or provision of misleading information in trading in futures and derivatives and relevant activities.
The futures and derivative market information disseminated by any communications media must be true and objective, and the dissemination of misleading information shall be prohibited. The communications media and their staff members engaged in the coverage of futures and derivative market information shall not trade in futures or derivatives with conflicts of interest in connection with their work duties and relevant activities.

Section 2 Trading in Futures

Article 17 The listing of futures contract products and standard option contract products shall comply with the rules of the futures regulatory agency of the State Council and be legally reported by the futures trading venue to the futures regulatory agency of the State Council for registration.
The suspension and resumption of listing and delisting of futures contract products and standard option contract products shall comply with the rules of the futures regulatory agency of the State Council and be decided by futures trading venues and filed with the futures regulatory agency of the State Council for recordation.
Futures contract products and standard option contract products shall have economic value, difficult to be manipulated, and conform to the public interest.

Article 18 The legal name registration system for accounts shall be implemented in futures trading. A trader trading in futures shall hold credentials legally proving his or her identity and apply for opening an account in his or her name.
No entity or individual may, in violation of the applicable provisions, lend its or his own futures account or borrow any other person's futures account for trading in futures.

Article 19 Whoever trades in futures on a futures trading venue shall be a member of the futures trading venue or any other participant in compliance with the rules of the futures regulatory agency of the State Council.

Article 20 Traders that authorize futures trading institutions to trade may place trade orders in writing or via telephone, self-service terminals, and the Internet, among others. Trade orders shall be specific, clear, and complete.

Article 21 Algorithmic trading executed based on trade orders automatically generated or placed by computer programs shall comply with the rules of the futures regulatory agency of the State Council, and be reported to the futures trading venue, and shall not affect the system security or the normal trading order of the futures trading venue.

Article 22 A margin system shall be adopted for futures trading. Futures clearing institutions shall collect margin from clearing participants and clearing participants shall collect margin from traders. Margin shall be used for settlement and performance guarantee.
The form of margin shall include cash, treasury bonds, stocks, fund shares, standard warehouse receipts and other highly liquid negotiable securities, and other properties prescribed by the futures regulatory agency of the State Council. Negotiable securities, among others, may be used as the margin by pledge or other forms with contract performance guarantee functions in accordance with the law.
The form and ratio, among others, of margin collected by futures clearing institutions and clearing participants shall comply with the rules of the futures regulatory agency of the State Council.
Where a trader trades under a standard option contract, the seller shall pay the margin and the buyer shall pay the premium.
For the purposes of the preceding paragraph, “premium” means the funds paid by the buyer to purchase a standard option contract.

Article 23 The position limit rules shall be implemented for futures trading, so as to prevent the risks of excessive position holding under the contracts.
Whoever engages in hedging and other risk management activities may apply for the exemption of the position limit.
The administrative measures for position limit and hedging shall be developed by the futures regulatory agency of the State Council.

Article 24 The management rules for the recordation of actual control relations of traders shall be implemented in futures trading. Traders shall report actual control relations to the futures trading institution or futures trading venue in accordance with the rules of the futures regulatory agency of the State Council.

Article 25 The charges collected for trading in futures shall be reasonable, and the fee items, fee rates, and management measures shall be published.

Article 26 The results of transactions conducted according to business rules developed by futures trading venues in accordance with the law shall not be changed, except under paragraph 2 of Article 89 of this Law.

Article 27 Members of futures trading venues and traders shall report significant matters such as trading, holding of positions, and margin, among others, according to the rules of the futures regulatory agency of the State Council.

Article 28 No entity or individual may use credit or fiscal funds to trade in futures in violation of the applicable provisions.

Article 29 Futures trading institutions, futures trading venues, futures clearing institutions, futures service institutions, and other institutions, and their practitioners shall report discovered prohibited trading acts to the futures regulatory agency of the State Council in a timely manner.

Section 3 Trading in Derivatives

Article 30 Legally formed venues may organize derivative trading with the approval of the department authorized by the State Council or the futures regulatory agency of the State Council.
The trading rules developed by the venues organizing derivative trading shall fairly protect the lawful rights and interests of all trading participants and prevent market risks, and shall be reported to the department authorized by the State Council or the futures regulatory agency of the State Council for approval.

Article 31 To conduct derivative trading, a financial institution shall obtain approval or confirmation in accordance with the law, perform its trader suitability management obligations, and comply with the relevant regulatory provisions of the state.

Article 32 If the master agreement is adopted in derivative trading, the master agreement, all supplementary agreements under the master agreement, and any agreements made by both parties to the transaction on all specific transactions, among others, shall together constitute a single integrated agreement between both parties to the transaction and be legally binding.

Article 33 The standard contract texts such as master agreements as provided for in Article 32 of this Law shall be submitted for recordation according to the applicable provisions of the department authorized by the State Council or the futures regulatory agency of the State Council.

Article 34 Performance guarantee may be legally provided for derivative transactions in such forms as pledge.

Article 35 Where derivatives are traded under the master agreement in accordance with the law, if any circumstance agreed upon occurs, trading may be terminated as agreed upon in the agreement, and netting of all trading profits and losses under the agreement shall be conducted.
Netting according to the provisions of the preceding paragraph shall not be suspended, invalidated, or revoked in the event that either party to the transaction enters bankruptcy proceedings in accordance with the law.

Article 36 The department authorized by the State Council and the futures regulatory agency of the State Council shall establish a derivative trading report database to centralize the collection, preservation, analysis, and management of the subject matter, size, counterparties, and other information on derivative transactions, and disclose the relevant information to the market in a timely manner according to the applicable provisions. The specific measures shall be provided for by the department authorized by the State Council and the futures regulatory agency of the State Council.

Article 37 Where derivative trading is settled in a centralized manner by a clearing institution as a central counterparty approved by the department authorized by the State Council or the futures regulatory agency of the State Council, netting may be terminated in accordance with the law; and settlement property shall be first used for settlement and delivery, and shall not be placed under seal, frozen, impounded, or be subjected to enforcement; and shall not be used by anyone before the completion of settlement and delivery.
Centralized settlement conducted in accordance with the law shall not be suspended, invalidated, or revoked in the event that either party participating in the settlement enters bankruptcy proceedings in accordance with the law.

Article 38 The specific measures for regulating and conducting the supervision and administration of derivative trading and relevant activities shall be provided for by the State Council in accordance with the principles of this Law.

Chapter III Futures Settlement and Delivery

Article 39 The mark-to-market system shall be employed for futures trading. Within the time prescribed by the futures trading venue, futures clearing institutions shall conduct settlement for all clearing participants at the settlement price on a day, and clearing participants shall conduct settlement for traders according to the settlement results of futures clearing institutions. Clearing participants and traders shall be notified of the settlement results in a timely manner on the same day.

Article 40 The margin and premium, among others, collected by a futures clearing institution or a clearing participant shall be separated from its own funds and deposited in special accounts of the futures margin custody institution for separate management and shall not be misappropriated in violation of any provision, in accordance with the rules of the futures regulatory agency of the State Council.

Article 41 Where the margin of a clearing participant fails to reach the standards prescribed in the business rules of a futures clearing institution, the futures clearing institution shall, in accordance with the provisions of business rules, notify the clearing participant to provide additional margin or close the position voluntarily within the prescribed period. If a clearing participant failed to provide additional margin or close the position voluntarily within the prescribed period, the futures trading venue shall be notified to close the position forcibly.
Where the margin of the trader fails to reach the standards agreed upon between the clearing participant and the trader, the clearing participant shall, as agreed upon, notify the trader to provide additional margin or close the position within the agreed time limit. If the trader fails to provide additional margin or close the position itself within the agreed time limit, the position shall be forcibly closed as agreed.
Where negotiable securities, among others, are used as margin and the futures clearing institution or clearing participant forcibly closes the position in accordance with the provisions of the preceding two paragraphs, the negotiable securities, among others, may be disposed of.

Article 42 Where a clearing participant breaches a contract in the course of settlement, the futures clearing institution shall, in accordance with the business rules, use the margin and settlement guarantee fund of the clearing participant, as well as the clearing institution's risk reserve and own funds, among others, to complete the settlement. A futures clearing institution that completes settlement using its risk reserve or own funds, among others, may recover compensation from the clearing participant in accordance with the law.
Where a trader breaches a contract during the process of settlement, the entrusted clearing participant shall complete the settlement by using the margin of the trader, and the clearing participant's risk reserve and own funds as agreed upon in the contract; if the clearing participant completes the settlement using its risk reserve and own funds, the clearing participant may recover compensation from the trader in accordance with the law.
For the purposes of this Law, “settlement guarantee fund” means the funds paid by the clearing participant to the futures clearing institution with its own funds as funds for performance guarantee.

Article 43 The margin, premium, settlement guarantee fund, risk reserve, and other assets collected or withdrawn by a futures clearing institution according to its business rules shall be first used for settlement and delivery, and shall not be placed under seal, frozen, impounded, or subjected to enforcement.
Before the completion of settlement and delivery, no one may use the margin used for performance guarantee and delivery and delivered property.
Settlement and delivery conducted in accordance with the law shall not be suspended, invalidated, or revoked in the event that either party participating in the settlement enters bankruptcy proceedings in accordance with the law.

Article 44 At the expiration of a futures contract, the trader shall close positions in the expiring contract through physical delivery or cash delivery.
Within the time prescribed in a standard option contract, the buyer of the contract shall have the right to purchase or sell the subject matter at the agreed price or settle the difference in cash as agreed upon, and the seller of the contract shall perform corresponding obligations as agreed upon. The exercise in a standard option contract shall be organized by the futures clearing institution.

Article 45 In case of physical delivery under a futures contract, the futures clearing institution shall be responsible for organizing the delivery of payment for goods and certificates of rights to the subject matter of the contract, such as standard warehouse receipts.
In case of cash delivery under a futures contract, the futures clearing institution shall transfer the profits and losses of both parties on the basis of the settlement price for delivery.
For the purposes of this Law, “standard warehouse receipts” means standard delivery certificates issued by the delivery warehouse and registered with the futures trading venue.

Article 46 Physical delivery in futures trading shall be conducted at a delivery warehouse or delivery port designated by the futures trading venue or any other place satisfying the requirements of the futures trading venue. There is no limit to the total amount of delivery in physical delivery. In case of physical delivery by documents other than standard warehouse receipts or by other means, the futures trading venue shall clearly define the rights and obligations of all parties to delivery.

Article 47 Where a clearing participant defaults on delivery, the futures clearing institution has the right to dispose of the clearing participant's certificates of rights to the subject matter of the contract such as standard warehouse receipts.
Where a trader defaults on delivery, the clearing participant shall have the right to dispose of the trader's certificates of rights to the subject matter of the contract such as standard warehouse receipts.

Article 48 A futures trading institution that fails to meet the conditions for clearing participants may authorize clearing participants to conduct settlement on behalf of their clients. The provisions of this Chapter on rights and obligations between clearing participants and traders shall apply, mutatis mutandis, to the relationships of rights and obligations between futures trading institutions that fail to meet the conditions for clearing participants and clearing participants and traders.

Chapter IV Futures Traders

Article 49 “Futures traders” means natural persons, legal persons, and unincorporated organizations that engage in futures trading and assume trading results in accordance with this Law.
A futures trader engaging in futures trading shall entrust a futures trading institution to conduct futures trading, except as otherwise provided for by the futures regulatory agency of the State Council.

Article 50 In providing services to traders, a futures trading institution shall, according to the applicable provisions, sufficiently gather the basic information on traders and their property status, financial asset status, trading knowledge and experience, professional capability, and other relevant information; truthfully explain the important contents of services, and fully reveal trading risks; and provide services commensurate with the aforesaid status of traders.
In participating in futures trading or accepting services, traders shall provide true information set out in the preceding paragraph according to the explicit requirements of the futures trading institution. If any trader refuses to provide information or fails to provide information as required, the futures trading institution shall inform the trader of the consequences, and refuse to provide services to the trader according to the applicable provisions.
A futures trading institution that violates the provision of paragraph 1 of this Article shall be liable in damages correspondingly, if the violation causes any loss to traders.

Article 51 Traders may be divided into ordinary traders and professional traders according to asset status, financial asset status, trading knowledge and experience, professional capability, and other factors. The standards for professional traders shall be provided for by the futures regulatory agency of the State Council.
Where any ordinary trader is in dispute with a futures trading institution, the futures trading institution shall prove that its conduct complies with laws, administrative regulations, and the rules of the futures regulatory agency of the State Council, without misleading, fraudulent, and other circumstances. The futures trading institution shall be liable in damages correspondingly, if it is unable to prove it.

Article 52 Legal persons and unincorporated organizations participating in futures trading shall establish internal control rules and risk control rules which correspond to the type, scale, and purpose, among others, of their trading contracts.

Article 53 The practitioners of futures trading institutions, futures trading venues, and futures clearing institutions, the futures regulatory agency of the State Council, and futures associations, as well as other persons prohibited from participating in futures trading by any law or administrative regulation or the rules of the futures regulatory agency of the State Council shall not trade in futures.

Article 54 Traders have the right to inquire about their authorization records, trading records, margin balance, and other important information related to their acceptance of services.

Article 55 Futures trading institutions, futures trading venues, futures clearing institutions, futures service institutions, and their staff members shall keep the information on traders confidential in accordance with the law, and shall not illegally purchase, sell, provide, or disclose publicly any information on traders.
Futures trading institutions, futures trading venues, futures clearing institutions, futures service institutions, and their staff members shall not divulge any trade secrets to which they have access.

Article 56 Where any dispute arises between a trader and a futures trading institution, among others, both parties may apply to an industry association, among others, for mediation. A futures trading institution shall not refuse an ordinary trader's request for mediation of a dispute between them over any futures business.

Article 57 Where traders institute civil actions for damages caused by market manipulation or insider trading, among others, related to futures, they may legally recommend and select representatives to participate in the actions if the subject matters of the actions are of the same kind and the parties on one side of the actions are numerous.

Article 58 The state shall set up a futures trader guarantee fund. The specific measures for raising, managing, and using the futures trader guarantee fund shall be developed by the futures regulatory agency of the State Council in conjunction with the finance department of the State Council.

Chapter V Futures Trading Institutions

Article 59 A futures trading institution means a futures company formed in accordance with the Company Law of the People's Republic of China and this Law and other institutions approved by the fu......