The China Securities Regulatory Commission (CSRC) has released the Draft Measures for the Supervision and Administration of Derivatives Trading (Trial) (Soliciting Opinions) for public consultation, aiming to further standardize the country's derivatives market.

The draft, developed in line with the Futures and Derivatives Law and the State Council's 2024 guidance on risk prevention and high-quality capital market development, outlines regulatory requirements for derivatives trading, which encompasses swaps, forward contracts, non-standardized options, and related combinations. Derivatives are recognized as instruments that support risk management, resource allocation, and service to the real economy.

Key Provisions of the Draft Measures

The draft establishes comprehensive rules covering:

1. Scope and Applicability – specifying which derivatives trading activities fall under CSRC supervision.

2. Market Function and Principles – clarifying derivatives' roles in risk management, resource allocation, and economic service, alongside principles for participants.

3. Contract Development – outlining conditions and procedures for the creation of derivatives contracts.

4. Trading Rules – defining fundamental transaction standards for various derivative instruments.

5. Performance Guarantee Systems – detailing requirements for settlement and default management.

6. Participant Suitability – establishing standards for trading eligibility.

7. Monitoring and Cross-Market Oversight – strengthening surveillance and regulatory coordination across markets.

8. Prohibitions and Restrictions – specifying forbidden or limited trading activities.

9. Institutional Oversight – reinforcing compliance requirements for entities operating in derivatives.

10. Market Infrastructure Supervision – overseeing trading venues, clearinghouses, and trade repositories.

11. Legal Responsibilities – clarifying supervisory and enforcement duties.

Context and Revisions

CSRC previously sought public feedback on a similar draft in 2023. While market participants generally supported the framework, they provided suggestions to improve clarity, operational adaptability, and regulatory effectiveness. The current draft incorporates many of these inputs, including enhanced business rules, strengthened internal control and risk management standards for derivatives institutions, more detailed compliance requirements, and refined legal responsibility provisions.

The CSRC invites further input from the public before finalizing the measures, aiming to balance market development with robust oversight.