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The Establishment of a Financial and Commodity Derivative Market in line with the Requirements of A Modern Economic System (Special Issue, No. 125, 2019)


By Shi Guang, Research Institute of Finance, DRC

Research Report, Special Issue, No. 125, 2019 (Total 1753) 2019-12-20

Abstract: The global derivatives market has been vigorously developed owing to economic globalization and financial liberalization since the 1970s, while the sub-prime mortgage crisis shows that the excessive speculation in the derivative market may trigger new risks and generate financial and economic crisis. The development of China’s derivatives market has undergone twists and turns and has its own features compared with the mature derivatives markets in develop countries. For example, China’s commodity derivatives market grows faster than that of financial derivatives, the development of futures market quicker than that of options and other derivatives, the development of over-the-counter derivatives market lags behind that of floor derivatives and the engagement of financial institutions is more involved than that of industrial entities. With the aim to fit into the requirements of a modern economic system and push ahead with the construction of derivatives market, the following policy options are suggested. One, the product structure of derivatives needs to be optimized so as to establish a high-quality and diversified derivative product structure; two, the market entities need to be cultivated in a quicker manner so as to enrich the investors of derivatives market; three, the regulation over derivatives market needs to be enhanced in order to truly prevent and resolve financial risks; and four, the restrictions on derivatives market access need to be steadily relaxed and its internalization level needs to be promoted.

Key words: financial regulation, derivatives, risk management