PRC Passes the Futures and Derivatives Law, the first PRC statute on OTC Derivatives (April 2022)
Client Briefings
Introduction
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After one year of public consultation, the PRC Futures and Derivatives Law (the "FDL") was passed by the Standing Committee of the National People's Congress of the PRC and promulgated by Chairman Order No. 111 on 20 April 2022. The FDL will take effect on 1 August 2022. Our previous client briefing on this subject can be found here.
The FDL marks one of the most important milestones in the development of the over-the-counter (OTC) derivatives market in the PRC, and is the culmination of intense regulatory engagement by industry bodies, financial market infrastructure, international dealers and law firms over many years. It is widely expected by market participants that this statute will pave the way for recognition of close-out netting in the PRC, as the FDL is the first national level statute that expressly recognises the concept of single agreement and protection of close-out netting against bankruptcy laws.
The FDL also (a) sets out a comprehensive legal framework in the PRC underpinning futures and derivatives trading, settlement and clearing, (b) introduces reporting requirements for derivatives, and (c) enhances regulation of marketing by non-PRC institutions in China.
