Futures And Derivatives Legislation In China

The Futures and Derivatives Law of the People's Republic of China ('FDL') was adopted by the National People's Congress on April 20th and is effective from August 1, 2022. The FDL is a historical development for the financial industry in China. Namely, it aligns future and derivative legislation with international netting practices and promotes standardisation of industry and market development.

The FDL Framework

Before the FDL, derivatives trading was indicated in the China Banking and Insurance Regulatory Commission issued the Circular on Relevant Issues Concerning the Rules for the Measurement of Counterparty Default Risk Assets in the Trading of Derivatives ('Measures'), adopted in 2021. The Measures enable qualified commercial banks to calculate exposure at the default of counterparties in derivatives trading on a net basis. Under the FDL Law, derivatives and the position of the derivatives market are defined for the first time at the legislation level. The