Chinese financial derivatives market developments and regulatory studies
|Keywords||Financial Crisis Financial Derivatives Systemic Risk Regulation Coordination|
This financial turmoil triggered by the CDS high leveraged derivatives has brought the derivative market into debate again. The gross market value of both the ETD and OTC market declined to almost half of pre-crisis levels during the crisis, and the CDS market has been mostly severely attacked as its GMV continues to decrease. The double edges of the financial derivative market have been exposed during the current crisis. On one hand, its risk hedge, price discovery and optimal allocation benefit both the avoidance of systemic risks and the improvement of the social and economic efficiency. On the other hand, overemphasis on the financial innovation with the absence of regulation would encourage rampant speculation and the concentrated systemic risk will finally lead to a crisis. Is a financial derivative an angel or devil? Should the recent financial crisis become obstacles to developing the China financial derivative market? How should China regulate the market at a preliminary stage?This paper holds that the main defects of the current financial derivative market revealed in this financial crisis has triggered the global financial derivative market realignment and the reconstruction of its regulatory framework. Against this background, it’s time to strengthen the correct guidance for the financial derivative market in China, rapidly improve its product system and take the opportunity to reconstruct our financial regulatory framework. For this reason, this paper analyses the global trend of financial derivative market development and regulation during the crisis from an all-around perspective, from which experiences would be concluded and lessons would be leant for reference for the reform of China’s financial derivative market.