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Research on Legal System of Close-out Netting in OTC Derivatives Transactions

Author: YuXi
Tutor: LuoPeiXin
School: East China University of Political Science
Course: Economic Law
Keywords: Netting Over-the-counter financial derivatives trading Right of early termination Calculation of the net Bankruptcy executory contract option Insolvency set-off rights Single agreement
CLC: D922.28
Type: Master's thesis
Year: 2011
Downloads: 98
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Abstract

Since the 70s of last century, derivatives trading has been the rapid development, especially the development of the situation of over-the-counter derivatives trading is quite eye-catching. There is a huge credit risk and potential systemic risk due to the over-the-counter derivatives trading, the termination of the netting system has become the practice of effective risk control essential contract system arrangements. However, in the case of bankruptcy involved in the transaction party, the system is often Bankruptcy mechanism and the concept of contradiction and embarrassment suffered in the legal validity and enforceability of uncertainty, which greatly detract from its function and role play. Our current law does not terminate the net settlement system to be explicitly recognize and support the above problems are also plagued our practice. Clarify the termination of a major conflict between where the netting system and the legal system of bankruptcy, and learn from the practice of extra-territorial financial legislation in developed countries, analysis of the necessity of implementing legislation, China's legislative path selection and the details of the legislation is designed and explore how to deal with this new problem, and the view of the current administration of justice, and to make recommendations. In addition to the introduction and conclusion herein, is divided into four chapters. The first chapter is over-the-counter financial derivatives trading Netting systems are outlined. Part of this is the full text of theoretical points. This chapter first introduces the concept and characteristics of over-the-counter derivatives trading, a netting system for the generation and defined, and stressed that the termination netting system function and value. NAFMII Master Agreement for the 2009 edition, for example, the analysis of the termination of the operating mechanism of the net settlement system, to pave the way for in-depth analysis of the following chapters. Finally, according to the interpretation of the concept and the internal mechanism to analyze and reveal the system of law in our country there is no real sense of netting, including termination netting system. This legal loophole is the uncertainty in China has caused the termination of the effectiveness of the netting provisions. The second chapter is the termination of the the netting system Bankruptcy contradiction. Institutional arrangements as a contractual termination netting system is only recognized by law in order to be implemented. Termination of the the netting system operation mechanism and bankruptcy law has a \This chapter clarifies the main point of conflict, the right of early termination (including early termination) bankruptcy executory contract option, and between the conflict between the netting bankruptcy offset system, combined with the specific provisions of the Bankruptcy Law of China to determine early termination rights with the terms of the net effect in the framework of the Bankruptcy Law of China does not have to determine the validity and enforceability of. The above analysis can be demonstrated: only exclude the corresponding legal system limits the termination of the netting system in order to effectively play its special features. The third chapter is the plight of crack - extra-territorial legal mature path of developed countries. Extraterritorial financial markets in developed countries started earlier and has been developed to a mature stage, earlier than our country faced with how to reconcile the termination of the the netting system Bankruptcy conflict between this problem. This chapter selected three typicality countries: United States, United Kingdom and Japan, although the Three specific ways, but the adoption of legislation to be clear to reconcile, highlighting the tendency to protect the position of the termination of a netting system for China to solve the problem a reference for. The fourth chapter of Netting legislation of the system design and the administration of justice to explore. This chapter is a full-text discusses foothold and significance. This chapter at first demonstration of the need for legislation. Then through a comparative analysis of the major international legislative models, combined with China's actual conditions, proposed legislative model suited to China's national conditions; details of the legislation and the system is designed in detail, including the scope of the application of the system and its executable of implementation mechanisms. In case of no clear legal requirement to be invoked, there is no case can refer to the Court the face of such cases should be the reasonable exercise of discretion? Suggestions in the last part of this chapter: the administration of justice should be positioned correctly, a reasonable choice referee philosophy value orientation, as well as research referee skills.

Research on Legal System of Close-out Netting in OTC Derivatives Transactions

Abstract

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