Recently, the China Securities Regulatory Commission officially released the latest "Measures for the Supervision and Administration of Derivatives Trading (Trial)" (hereinafter referred to as the "Measures").
This new regulation consists of 7 chapters and 56 articles, detailing every aspect of the derivatives market, including how to trade and settle, who can participate, rules that operating institutions must follow, and what legal responsibilities will be borne if violated. Its core purpose is very clear: to set 'rules' for the derivatives market, prevent financial risks, protect everyone's legitimate rights and interests, and help the market develop more healthily and steadily.
With the implementation of these "Measures," China's derivatives market will enter a new stage of more standardized, transparent, and open nature, and will be able to better serve the real economy in the future, helping everyone manage risks and allocate resources.
| Filling regulatory gaps, giving the market "legal basis"
Previously, derivatives trading mainly relied on agreements signed by both parties to constrain themselves. Although industry associations have implemented considerable self-regulation, the lack of higher-level institutional documents has limited market development and frequent disputes. This time, the "Measures" are specifically addressing these chaotic phenomena and problems, providing a clear legal basis for resolving them.
Regarding who this new regulation governs, and who it does not, the "Measures" clearly define the boundaries: they only apply to derivatives trading venues and operating institutions within the scope of CSRC supervision. Simply put, the interbank market and the over-the-counter derivatives markets organized by banks and insurance companies themselves are not directly applicable; But if banks and insurance companies enter the SFC-regulated market as traders, they must follow this rule.
If the previous "Futures and Derivatives Law" built the market's 'four beams and eight pillars,' then this time, the 'Measures' fill these broad frameworks with concrete bricks. It refines specific operational rules such as trading reports, position calculations, and performance guarantees, achieving a perfect closed loop from legal principles to implementation.
The biggest highlight of the "Measures" is that it fills the regulatory gap for off-exchange derivatives (such as swaps, forward contracts, etc.), establishing a comprehensive regulatory network of "on-exchange standardization and off-exchange standardization." As a result, the rules of the entire market are unified, making it impossible to exploit loopholes for "regulatory arbitrage."
| Clarifying quantitative entry thresholds and defining business "hard leverage"
After the new regulations are implemented, futures companies wishing to operate derivatives business must overcome a clear capital threshold: net capital must consistently be no less than 500 million RMB in the past six months. Besides ensuring the funds are in place, a series of soft conditions must also be met, such as sound corporate governance and internal controls, qualified venues and systems, senior executives responsible for this business must have more than three years of relevant work experience, and no major violations or violations in the past two years.
Compared to the previous draft for public comment, the officially released "Measures" not only add a clear net capital requirement but also give regulators the authority to flexibly adjust — in the future, this minimum limit can be raised according to the principle of prudent regulation, leaving room for stricter regulation.
In addition, the requirement for executives' work experience has been lowered from the original 5 years to 3 years, reflecting that regulators are strictly controlling while also considering market realities. Zhang Fan from Yide Futures believes this is the first time the entry threshold for quantitative data has been clearly defined, turning previously vague capital requirements into verifiable and enforceable rigid constraints.
In addition to the entry threshold, the "Measures" also have several noteworthy highlights:
New definition of violations: Based on the law, it further clarifies that "transactions using non-public information," "illegal share reduction," and "benefit transfer" are illegal and non-compliant behaviors. Standardizing margin management: Clearly stipulates margin requirements for derivative trading and introduces the "transfer of margin rights" as a performance protection method. Consolidated position calculation: Specifying the position limits for futures trading and major trader reports, derivatives positions must be combined for calculation. Set trader standards: Participants must meet the SFC's "professional trader" criteria (however, to encourage risk avoidance, those engaged in hedging or other risk management activities may be exempt from some standards). Implementing real-name account registration: Strictly stipulates real-name account registration and requirements for opening trading accounts.
| Promoting compliance and transformation in futures institutions' business operations
According to the new regulations, derivatives business will be taken back from the futures company's "risk management subsidiary" and operated directly by the parent company. This change also raises higher requirements for futures institutions to operate compliantly.
In the past, subsidiaries operated independently, making it difficult for parent companies to grasp their risk status in real time. Now that business has been consolidated under the parent company, capital measurement, net capital monitoring, and stress testing will all be managed under a unified framework, leaving risks nowhere to hide.
In the future, futures companies' compliance and risk control will undergo a comprehensive upgrade:
Overall risk control: Derivatives business must be incorporated into the overall risk control system to accurately identify and address various risks; Strict scale control: Strictly control the concentration of holdings to ensure business scale matches the company's capital strength and risk control capabilities; Refined management: margin must be monitored daily to the market, and a sound pricing and valuation system should be established; Business Isolation: Hedging trading must use dedicated accounts, and derivatives business must be strictly separated from brokerage and other businesses with conflicts of interest.
From a business orientation perspective, the "Measures" clearly include "serving the real economy" in the general provisions, proposing to "restrict overly complex contracts" and "encourage hedging." Combined with provisions such as account real-name registration, consolidated position calculations, and prohibition on using derivatives to circumvent share reduction regulations, the previous "loophole" in cross-market arbitrage will be completely closed.
Kingtech Perspective | Industry concentration is rising, and the 'Matthew effect' is intensifying
The introduction of the "Measures for the Supervision and Administration of Derivatives Trading" marks the departure of fragmented regulation in China's derivatives market and the entry into a new stage of unified regulation.
In the short term, high thresholds and strict regulation may cause some small and medium-sized institutions to feel growing pain, even facing pressure from business contraction; In the long run, only by tightening the fences of rules and understanding the bottom line of risks can China's derivatives market truly become a powerful tool for serving the real economy and managing macro risks.
For investors, keeping pace with leading institutions and focusing on the development of regtech remains the most prudent strategy at present.
Opportunity One: Leading brokerages/futures companies with capital and pricing advantages
Against the backdrop of accelerated industry clearing, leading securities firms such as CITIC, CICC, and Huatai, which have strong capital capabilities, pricing power, and solid client bases, will further consolidate their market share and enjoy the benefits brought by increased industry concentration.
Opportunity 2: A professional provider of financial IT and compliance technology services
As regulatory requirements for daily market monitoring, portfolio consolidation, and penetrative regulation become increasingly stringent, financial institutions' demand for high-performance trading systems, intelligent risk control models, and compliance technology (RegTech) solutions is set for explosive growth.
