Regulations for the Administration of Futures Trading

Revised on October 24 2012. Latest revision can be found at: http://www.chinalawandpractice.com/Article/3140078/Regulations-for-the-Administration-of-Futures-Trading-Revised.html

(Promulgated by the State Council on March 6 2007 and effective as of April 15 2007.)

Order of the State Council No.489

PART ONE: GENERAL PROVISIONS

Article 1: These Regulations have been formulated to standardize futures trading, strengthen the regulation of futures trading, safeguard the order in the futures market, minimize risk, protect the lawful rights of all parties in futures trading and the public interest, and promote the active and steady development of the futures market.

Article 2: Any work unit or person engaged in futures trading, including trading of commodity or financial futures or options contracts, and related activities, must comply with these Regulations.

Article 3: Those engaged in futures trading activities shall abide by the principles of openness, fairness, impartiality and good faith. Illegal acts such as fraud, insider trading and manipulation of futures trading prices are forbidden.

Article 4: Futures shall be traded on a lawfully established futures exchange or in another trading venue approved by the State Council's futures regulatory authority.

The trading of futures in a futures trading venue other than one approved by the State Council's futures regulatory authority is prohibited, as is the trading of futures in a disguised manner.

Article 5: The State Council's futures regulatory authority shall implement centralized and unified regulation of the futures market.

The agencies of the State Council's futures regulatory authority shall perform their oversight duties in accordance with the relevant provisions hereof and as authorized by the State Council's futures regulatory authority.

PART TWO: FUTURES EXCHANGES

Article 6: The establishment of futures exchanges shall be subject to the examination and approval of the State Council's futures regulatory authority.

No work unit or individual may establish a futures exchange, or organize futures trading or related activities in any manner, without obtaining the approval of the State Council's futures regulatory authority.

Article 7: Futures exchanges shall be non-profit and implement self-regulation in accordance with its articles of association. A futures exchange bears civil liabilities to the extent of all of its property. The State Council's futures regulatory authority shall be responsible for the appointment and dismissal of the person in charge of a futures exchange.

The measures for the administration of futures exchanges shall be formulated by the State Council's futures regulatory authority.

Article 8: Futures exchange members shall be legal persons or other economic organizations registered within the borders of the People's Republic of China.

A futures exchange may implement a clearance system by member grade. The membership of a futures exchange that implements the clearance system by member grade shall be composed of clearing members and non-clearing members.

The clearance qualifications of clearing members shall be subject to the approval of the State Council's futures regulatory authority. The State Council's futures regulatory authority shall render its decision on whether or not to grant its approval within three months from the date on which it accepted the application for clearance qualifications.

Article 9: A person characterized by any of the circumstances specified in Article 147 of the PRC Company Law or either of the circumstances set forth below may not serve as the person in charge or a member of the financial accounting personnel of a futures exchange:

(1) the person in charge of a futures exchange, stock exchange or a securities depositary and clearing institution, a director, supervisor or senior officer of a futures company or securities company or another person as specified by the State Council's futures regulatory authority who was dismissed from his/her position due to a violation of the law or a breach of discipline and less than five years have elapsed since the date of his/her dismissal; or

(2) a lawyer, certified public accountant or a professional of an investment consulting firm, financial consulting firm, credit rating agency, asset appraisal institution or verification institution who has had his/her qualifications revoked due to a violation of the law or a breach of discipline and less than five years have elapsed since the date of such revocation.

Article 10: A futures exchange shall formulate and enhance various rules and regulations in accordance with these Regulations and the provisions of the State Council's futures regulatory authority, and strengthen risk control over trading activities and oversight of members and its working personnel. A futures exchange shall perform the following functions:

(1) providing a trading floor, facilities and services;

(2) designing contracts and arranging the listing of such contracts;

(3) organizing and supervising trading, settlement and delivery;

(4) ensuring the performance of contracts;

(5) overseeing members in accordance with articles of association and trading rules; and

(6) other functions as specified by the State Council's futures regulatory authority.

A futures exchange may not directly or indirectly take part in futures trading. Without the examination of the State Council's futures regulatory authority and the approval of the State Council, a futures exchange may not engage in trust investment, stock investment, investment in immovable property not for its own use or other such business unrelated to its functions.

Article 11: A futures exchange shall establish the following sound risk management systems in accordance with the relevant state provisions:

(1) a margin system;

(2) a daily settlement system;

(3) a price limit system;

(4) a position limit system and reporting limits system;

(5) a risk reserve system; and

(6) other risk management systems as specified by the State Council's futures regulatory authority.

A futures exchange that implements the clearance system by member grade shall additionally establish a sound clearing fund system.

Article 12: When unusual circumstances occur in the futures market, a futures exchange may adopt the following emergency measures in accordance with the powers and procedures specified in its articles of association, and it shall promptly make a report to the State Council's futures regulatory authority:

(1) increase the margin;

(2) adjust the price limits;

(3) limit the maximum positions of members or customers;

(4) temporarily suspend trading; or

(5) adopt other emergency measures.

For the purposes of the preceding paragraph, the term "unusual circumstance" means the manipulation of futures trading prices in the course of trading, or the occurrence of a force majeure event or of another circumstance as specified by the State Council's futures regulatory authority.

Once the unusual circumstances have passed, the futures exchange shall cancel the emergency measures in a timely manner.

Article 13: A futures exchange shall obtain the approval of the State Council's futures regulatory authority:

(1) if it is to formulate or amend its articles of association or trading rules;

(2) if it is to list, suspend, cancel or revive a trading product;

(3) if it is to list, amend or end a contract;

(4) if it is to change its domiciles or place of business;

(5) if it is to undergo a merger, division or dissolution; or

(6) for other matters as specified by the State Council's futures regulatory authority.

When the State Council's futures regulatory authority is to approve the listing of a new trading product on a futures exchange, it shall seek the opinions of the relevant departments of the State Council.

Article 14: The revenue obtained by a futures exchange shall be managed and used in accordance with relevant state provisions, but shall first be used to ensure the operation and improvement of the futures trading venue and facilities.

PART THREE: FUTURES COMPANIES

Article 15: A futures company is a financial institution established in accordance with the PRC Company Law and these Regulations and that engages in futures business. The establishment of a futures company shall require the approval of the State Council's futures regulatory authority and registration with the company registration authority.

No work unit or individual may establish or in disguised manner establish a futures company or engage in futures business without the approval of the State Council's futures regulatory authority.

Article 16: To apply for establishment of a futures company, the PRC Company Law shall be complied with and the following conditions shall be met:

(1) having a minimum registered capital of Rmb30 million;

(2) having directors, supervisors and senior management personnel with the qualifications for their positions and practitioners with the qualifications to engage in futures business;

(3) having articles of association that comply with laws and administrative regulations;

(4) the major shareholder or de facto controller having the capacity to be continuously profitable, having a good credit rating and not having a record of a major violation of laws or regulations during the most recent three years;

(5) having a compliant place of business and business facilities;

(6) having sound risk management systems and internal control systems; and

(7) other conditions as specified by the State Council's futures regulatory authority.

In line with the principle of prudent regulation and the degree of risk attaching to various types of business, the State Council's futures regulatory authority may increase the minimum registered capital. Registered capital shall be paid-in capital. A shareholder shall make its capital contribution in cash or in the form of non-monetary property that is required for the operations of a futures company. Cash may not account for less than 85% of a capital contribution.

The State Council's futures regulatory authority shall conduct an examination in line with the principle of prudent regulation and render its decision on whether or not to grant its approval within six months from the date of accepting an application for the establishment of a futures company.

No unit or individual may appoint, or accept an appointment from, a third party to hold or manage equity of a futures company without the approval of the State Council's futures regulatory authority.

Article 17: The business of a futures company shall be subject to a permit system, with the State Council's futures regulatory authority issuing such permits based on the types of commodity futures or financial futures business the futures company engages in. In addition to applying to engage in domestic futures brokering, a futures company may apply to engage in overseas futures brokering, futures investment consulting and other futures business specified by the State Council's futures regulatory authority.

A futures company may not engage in activities unrelated to futures business, unless otherwise specified in laws, administrative regulations or by the State Council's futures regulatory authority.

A futures company may not engage in or in a disguised manner engage in futures business for its own account.

A futures company may not provide financing to its shareholders, de facto controller or other affiliated parties, nor may it provide security for third parties.

Article 18: When a futures company engaging in futures brokering accepts a commission from a customer to conduct futures trading for the customer in the company's own name, the consequences of the trading shall be borne by the customer.

Article 19: A futures company shall obtain the approval of the State Council's futures regulatory authority:

(1) if it is to undergo a merger, divide, suspend operations, be dissolved or go bankrupt;

(2) if it is to change its corporate form;

(3) if it is to change its scope of business;

(4) if it is to make a change in its registered capital;

(5) if a change in at least 5% of its equity is to occur;

(6) if it is to establish, acquire, take an equity interest in, or terminate the business of, a futures business establishment abroad; or

(7) for other matters as specified by the State Council's futures regulatory authority.

The State Council's futures regulatory authority shall render its decision on whether or not to grant its approval in respect of a matter specified in Item (4) or (7) of the preceding paragraph within 20 days from the date of acceptance of the application therefor and in respect of any of the other matters specified in the preceding paragraph within two months from the date of acceptance of the application therefor.

Article 20: A futures company shall obtain the approval of an agency of the State Council's futures regulatory authority:

(1) if it is to replace its legal representative;

(2) if it is to change its domicile or place of business;

(3) if it is to establish or terminate the business of a branch or sub-branch in China;

(4) if it is to change the place of business, person in charge or scope of business of a branch or sub-branch in China; or

(5) for other matters as specified by the State Council's futures regulatory authority.

The agency of the State Council's futures regulatory authority shall render its decision on whether or not to grant its approval in respect of a matter specified in Item (1), (2), (4) or (5) of the preceding paragraph within 20 days from the date of acceptance of the application therefor and in respect of a matter specified in Item (3) of the preceding paragraph within two months from the date of acceptance of the application therefor.

Article 21: If a futures company or a branch or sub-branch thereof is characterized by any of the circumstances specified in Article 70 of the PRC Administrative Licensing Law or any of the circumstances set forth below, the State Council's futures regulatory authority shall carry out the procedure for the cancellation of its futures business permit in accordance with the law:

(1) its business licence is cancelled by the company registry in accordance with the law;

(2) more than three months have elapsed since its establishment and it has not yet commenced operations without any legitimate reason or, after commencing operations, it suspends operations for a continuous period of at least three months without any legitimate reason;

(3) it itself files an application for cancellation; or

(4) other circumstances as specified by the State Council's futures regulatory authority.

A futures company shall, before its futures business permit is cancelled, fully settle relevant futures matters and refund customers' margins and other assets in accordance with the law. A branch or sub-branch of a futures company shall, before its futures business permit is cancelled, terminate its business activities and duly dispose of customers' assets.

Article 22: A futures company shall establish, enhance and strictly implement business management regulations and risk management systems, abide by rules and regulations on information disclosure, ensure the safe custody of customers' margins and, in accordance with the provisions of the futures exchange, submit to it lists of large positions and information on their transactions.

Article 23: Other futures business firms that engage in businesses such as futures investment consulting and the provision of intermediary services to futures companies shall obtain business qualifications as approved by the State Council's futures regulatory authority. The specific measures for the administration thereof shall be formulated by the State Council's futures regulatory authority.

PART FOUR: BASIC RULES OF FUTURES TRADING

Article 24: A party conducting futures trading in a futures exchange shall be a member of that exchange.

Article 25: When a futures company accepts a commission to conduct futures trading for a customer, it shall first provide an explanation of the risks and after the customer signs in acknowledgment, the company shall execute a written contract with the customer. A futures company may not carry out futures trading without commission from customers or in violation of customers' instructions.

A futures company may not guarantee profits to its customers or, in its brokering business, agree with the customer to share returns or jointly bear risks.

Article 26: The following work units and individuals may not engage in futures trading and futures companies may not accept their commissions and conduct futures trading for them:

(1) state authorities and public institutions;

(2) working personnel of the State Council's futures regulatory authority, futures exchanges, institutions responsible for monitoring the safe custody of futures margins, or futures associations;

(3) parties that are prohibited from entering the stock or futures market;

(4) work units and individuals that are unable to produce bank account documentation; and

(5) other work units and individuals that the State Council's futures regulatory authority stipulates may not engage in futures trading.

Article 27: Customers may transmit their trading instructions to a futures company in writing, by telephone, through the internet or by other means as specified by the State Council's futures regulatory authority. A customer's trading instructions shall be clear and comprehensive.

A futures company may not conceal important matters or use other improper means to induce a customer to issue trading instructions.

Article 28: A futures exchange shall, in a timely manner, publish the trading volume, trading price, position, ceiling price, floor price, opening price and closing price of listed products contracts and other market updates that should be published, and it shall ensure that such updates are true and accurate. A futures exchange may not publish information on price predictions.

Without permission of the futures exchange, no work unit or individual may publicize futures market updates.

Article 29: A margin system shall be strictly implemented for futures trading. The margins collected by a futures exchange from its members and by a futures company from its customers may not be lower than the standards set by the State Council's futures regulatory authority and the futures exchange, and must be kept separate from the exchange's or the futures company's own funds and deposited in a dedicated account.

The margins collected from a member by the futures exchange shall belong to the member and, aside from using it to settle the member's transactions, their use for other purposes is strictly prohibited.

The margins that a futures company collects from a customer shall belong to such customer and, aside from the transfers set forth below, their use for other purposes is strictly prohibited:

(1) paying funds available as requested by the customer;

(2) depositing the margins and paying handling charges and taxes for the customer; and

(3) other circumstances as specified by the State Council's futures regulatory authority.

Article 30: A futures company shall open an independent dedicated account for, and assign a trading code to, each customer, and may not conduct mixed code trading.

Article 31: A futures company that engages in both futures brokering and other futures businesses shall strictly implement a system of segregating the businesses and the funds and may not mix the operation of both.

Article 32: Futures exchange members and customers may use standard warehouse receipts, sovereign bonds or other such stable-priced, highly liquid negotiable securities as part of their margins to trade futures. The types of negotiable securities, the methods of calculating their values and the percentage of a margin for which they can account, etc., shall be specified by the State Council's futures regulatory authority.

Article 33: The qualifications of a banking financial institution to engage in futures margin custody and futures settlement business shall be subject to the examination and consent of the State Council's banking regulatory authority and the approval of the State Council's futures regulatory authority.

Article 34: Futures exchanges, futures companies and non-futures company settlement members shall allocate funds for, manage and use its risk reserve in accordance with the provisions of the State Council's futures regulatory authority and the finance department, and may not divert it for other uses.

Article 35: The fee items and fee rates for futures trading and the measures for the administration thereof shall be centrally formulated and published by the relevant competent departments of the State Council.

Article 36: Futures trading shall be carried out in a public and centralized fashion or in another manner as specified by the State Council's futures regulatory authority.

Article 37: The settlement of futures transactions shall be organized and conducted centrally by a futures exchange.

Futures exchanges shall implement a daily settlement system. They shall, in a timely manner, notify members of the settlement results daily.

A futures company shall settle with its customers based on the settlement results of the futures exchange and notify the customers of the settlement results by the method agreed with the customers in a timely manner. A customer shall, in a timely manner, check such results and duly dispose of its trading positions.

Article 38: When a futures exchange member's margin is insufficient, it shall, in a timely manner, supplement its margin or close the position itself. If the member fails to supplement its margin or close the position itself within the time period mandated by the futures exchange, the futures exchange shall forcibly close the member's position in the contract and the charges related to and the losses incurred from the forced closure shall be borne by the member.

When a customer's margin is insufficient, it shall, in a timely manner, supplement its margin or close the position itself. If the customer fails to supplement its margin or close the position itself within the time period mandated by the futures company, the futures company shall forcibly close the customer's position in the contract and the charges related to and the losses incurred from the forced closure shall be borne by the customer.

Article 39: The delivery of futures transactions shall be organized and conducted centrally by the futures exchange.

The delivery warehouse shall be designated by the futures exchange. The futures exchange may not limit the total volume of physical goods delivered and shall execute an agreement with the delivery warehouse specifying the rights and obligations of both parties. A delivery warehouse may not:

(1) issue fraudulent warehouse receipts;

(2) breach the futures exchange's operational rules, restrict the entry into and exit from the warehouse of delivered commodities;

(3) disclose futures trading related commercial secrets;

(4) participate in futures trading in violation of relevant state provisions; or

(5) be involved in other acts as specified by the State Council's futures regulatory authority.

Article 40: If a member defaults on a futures transaction, the futures exchange shall first use the member's margin to offset the liability for default. If the member's margin is insufficient, the futures exchange shall use its risk reserve and its own funds to offset the liability for default on the member's behalf and, in this manner, obtain the attendant right of recourse against the member.

If a customer defaults on a futures transaction, the futures company shall first use the customer's margin to offset the liability for default. If the customer's margin is insufficient, the futures company shall use its risk reserve and its own funds to offset the liability for default on the customer's behalf and, in this manner, obtain the attendant right of recourse against the customer.

Article 41: A futures exchange that implements a clearing system by member grade shall collect clearing funds from clearing members. The futures exchange shall only effect clearance with, and collect and call margins from, clearing members, and shall offset liability for default on behalf of clearing members by using the clearing fund, risk reserve and its own funds and by taking other relevant measures. Clearance with, and the collection and calling of margins from, non-clearing members, the bearing of liability for default on their behalves and the taking of other measures shall be carried out by clearing members.

Article 42: Futures exchanges, futures companies and non-futures company clearing members shall ensure the completeness and security of futures transaction, settlement and delivery documentation.

Article 43: No work unit or individual may fabricate or spread false futures trading related information, collude in bad faith, carry out joint purchases or sales, or use any other means to manipulate futures trading prices.

Article 44: No work unit or individual may use loan funds or public finance funds to conduct futures trading in violation of regulations.

The qualifications of a banking financial institution to engage in the financing of, or the provision of security for, futures trading shall be subject to the approval of the State Council's banking regulatory authority.

Article 45: When a state-owned or state controlled enterprise engages in futures trading in China or abroad, it shall comply with the principle of hedging and strictly observe provisions of the State Council's state-owned assets supervision and administration authority and other relevant departments on the entry by enterprises into the futures market with state-owned assets.

Article 46: Types of commodities whose futures are to be traded abroad by work units or individuals in China shall be subject to the approval of the State Council's department in charge of commerce.

The purchase, settlement, receipt and expenditure of foreign exchange in connection with overseas futures trading shall comply with relevant state provisions on exchange control.

The measures for the engagement in overseas futures trading by domestic work units and individuals shall be formulated by the State Council's futures regulatory authority in concert with relevant departments, such as the State Council's department in charge of commerce, state-owned assets supervision and administration authority, banking regulatory authority and foreign exchange control department and shall be implemented after approval by the State Council.

PART FIVE: FUTURES ASSOCIATIONS

Article 47: A futures association is a self-regulatory organization of the futures industry and is a social organization with legal personality.

Futures companies and other firms that specialize in futures business shall join a futures association and pay membership fees.

Article 48: The highest authority of a futures association shall be the members' general meeting comprising all the members.

The charter of a futures association shall be formulated by the members' general meeting and submitted to the State Council's futures regulatory authority for the record.

A futures association shall have a council. The members of the council shall be elected in accordance with the charter,

Article 49: A futures association shall perform the following duties:

(1) educating and organizing members in complying with futures laws, regulations and policies;

(2) formulating self-regulatory rules for the industry that members are required to abide by, monitoring and inspecting members' acts and imposing disciplinary sanctions on members that breach the association charter or the self-regulatory rules;

(3) being responsible for the recognition, administration and revocation of the qualifications of futures practitioners;

(4) accepting futures business related complaints from customers and mediating disputes between members and between members and customers;

(5) safeguarding the lawful rights and interests of members in accordance with the law and reporting the proposals and requests of members to the State Council's futures regulatory authority;

(6) organizing the vocational training of futures practitioners and arranging business exchanges among members;

(7) organizing research by members on the development and operation of the futures industry and relevant information; and

(8) other duties as specified in the futures association's charter.

The business activities of futures associations shall be subject to the guidance and monitoring of the State Council's futures regulatory authority.

PART SIX: OVERSIGHT

Article 50: The State Council's futures regulatory authority is responsible for overseeing the futures market and shall perform the following duties in accordance with the law:

(1) formulating the rules and regulations for the oversight of the futures market, and exercising its examination and approval authority in accordance with the law;

(2) overseeing futures trading and related activities, such as the listing of new products, trading, clearance and delivery;

(3) overseeing the futures business activities of relevant market participants, such as futures exchanges, futures companies, other futures business firms, non-futures company clearing members, institutions responsible for monitoring the safe custody of futures margins, futures margin custody banks and delivery warehouses;

(4) formulating the standards for, and the measures for the administration of, the qualifications of futures practitioners, and monitoring the implementation thereof;

(5) monitoring and inspecting the disclosure of futures trading information;

(6) guiding and monitoring the activities of futures associations;

(7) investigating and dealing with violations of futures market oversight laws and administrative regulations;

(8) engaging in international exchanges and cooperative activities relating to futures market oversight; and

(9) other duties as specified in laws and administrative regulations.

Article 51: When performing its duties in accordance with the law, the State Council's futures regulatory authority may take the following measures:

(1) conducting onsite inspections of futures exchanges, futures companies, other futures business firms, non-futures company clearing members, institutions responsible for monitoring the safe custody of futures margins and delivery warehouses;

(2) entering premises where a violation of the law is suspected of having been committed to investigate and obtain evidence;

(3) interviewing concerned parties, and work units and individuals that are connected to the event being investigated and requiring them to provide an explanation of matters relating to the event being investigated;

(4) reviewing and taking copies of property title registrations relating to the event being investigated, etc.;

(5) reviewing and taking copies of the futures transaction records, financial accounting information and other relevant documents and information of the concerned parties and of work units and individuals that are connected to the event being investigated; and sealing those documents and information that could be removed, concealed or destroyed;

(6) making inquiries about the margin accounts and bank accounts of work units that are connected to the event being investigated;

(7) when investigating major violations of futures laws, such as the manipulation of futures trading prices and insider trading, it may, with the approval of the main person in charge of the State Council's futures regulatory authority, restrict futures trading by the concerned parties of the event being investigated, provided that such restriction does not exceed 15 trading days; if the case is complex, the restriction may be extended to 30 trading days; and

(8) other measures as specified in laws and administrative regulations.

Article 52: Futures exchanges, futures companies, other futures business firms and institutions responsible for monitoring the safe custody of futures margins shall submit their financial accounting reports, business information and other relevant information to the State Council's futures regulatory authority.

The State Council's futures regulatory authority shall designate specific persons to review the annual reports submitted by futures companies and other futures business firms and prepare review reports. The review personnel shall sign the review reports. If a problem is discovered in the course of a review, the State Council's futures regulatory authority shall take appropriate measures in a timely manner.

When necessary, the State Council's futures regulatory authority may require non-futures company clearing members, delivery warehouses as well as the shareholders, de facto controller or other affiliated parties of a futures company to submit relevant information.

Article 53: When the State Council's futures regulatory authority is performing its duties in accordance with the law by conducting a monitoring inspection or an investigation, the work unit and individuals being inspected or investigated shall give their cooperation, provide relevant documents and information in a truthful manner and may not refuse to do so, interfere or conceal such documents and information. Other relevant departments and work units shall give their support and cooperation.

Article 54: The state shall, as required by the development of the futures market, establish a futures investor protection fund.

The specific measures for raising, managing and using the futures investor protection fund shall be formulated by the State Council's futures regulatory authority in concert with the State Council's finance department.

Article 55: The State Council's futures regulatory authority shall establish a sound system for monitoring the safe custody of futures margins and establish institutions responsible for monitoring the safe custody of futures margins.

Customers, futures exchanges, futures companies, other futures business firms, non-futures company clearing members and futures margin custody banks shall abide by the provisions of the State Council's futures regulatory authority on the monitoring of the safe custody of futures margins.

Article 56: An institution responsible for monitoring the safe custody of futures margins shall monitor the security of margins in accordance with relevant provisions, conduct daily audits and, if it discovers a problem, promptly report the same to the State Council's futures regulatory authority. The State Council's futures regulatory authority shall handle the matter in a timely manner in accordance with the relevant provisions hereof based on the circumstances.

Article 57: The State Council's futures regulatory authority shall implement a system for the administration of the qualifications of the directors, supervisors, senior management personnel and other futures business personnel of futures exchanges, futures companies, other futures business firms, and institutions responsible for monitoring the safe custody of futures margins.

Article 58: The State Council's futures regulatory authority shall formulate rules for the sustained operations of futures companies, specify risk monitoring indicators for futures companies, such as the ratio of net capital to net assets, the ratios of net capital to the scale of domestic futures brokering, overseas futures brokering and other such businesses, and the ratio of currant assets to current liabilities, and set forth requirements in respect of the operating conditions, risk management, internal controls, margin custody, affiliated transactions, etc., of futures companies and their branches and sub-branches.

Article 59: If a futures company or a branch or sub-branch thereof fails to comply with the rules on sustained operations or a risk to its operations arises, the State Council's futures regulatory authority may take regulatory measures against the futures company and its directors, supervisors and senior management personnel such as the giving of a regulatory discussion, giving of a reminder and making a notation in the trustworthiness record, or may order the futures company to rectify the matter within a specified period of time and conduct an inspection and acceptance of such rectification.

If the futures company fails to rectify the matter within the specified period of time, and if its act seriously jeopardizes its stable operation and harms the lawful rights and interests of customers or the futures company is suspected of constituting a serious violation of laws or regulations and is being investigated by the State Council's futures regulatory authority, the State Council's futures regulatory authority may, depending on the circumstances, take the following measures against it:

(1) restricting or suspending part of its futures business;

(2) suspending approval of new business or branches and sub-branches;

(3) restricting the distribution of dividends and restricting the payment of remuneration and the provision of benefits to directors, supervisors and senior management personnel;

(4) restricting transfers of property or encumbering such property with other rights;

(5) ordering it to replace directors, supervisors and senior management personnel, or the persons in charge of relevant business departments or branches and sub-branches or restricting their rights;

(6) restricting the allocation and use of the futures company's own funds or risk reserve; and/or

(7) ordering its controlling shareholder to transfer its equity or restricting the exercise by the relevant shareholders of their shareholder rights.

The State Council's futures regulatory authority shall revoke the measures it has taken against a futures company within three days from completing the acceptance check thereof if, after undergoing rectification, such company satisfies the requirements of relevant laws, administrative regulations and the rules on sustained operations.

If, after rectification, the futures company still fails to satisfy the requirements of the rules on sustained operations, seriously affecting its normal operations, the State Council's futures regulatory authority shall have the right to revoke some or all of its futures business permits and/or close branches and sub-branches thereof.

Article 60: If a futures company operates in violation of the law or faces a material risk, seriously jeopardizing the order of the futures market and harming the interests of customers, the State Council's futures regulatory authority may take regulatory measures against it such as ordering it to suspend operations and undergo rectification or appointing an entrusted manangement or receiver for it. With the approval of the State Council's futures regulatory authority, the following measures may be taken against the directors, supervisors and senior management personnel of the futures company who are directly in charge and other directly responsible persons:

(1) notifying the exit control authority to bar them, in accordance with the law, from leaving the country; and/or

(

2) submitting an application to the judicial authority to prohibit them from transferring, assigning or otherwise disposing of property, or encumbering the property with other rights.

Article 61: If the shareholder of a futures company makes a fraudulent capital contribution or illegally withdraws its capital contribution, the State Council's futures regulatory authority shall order it to rectify the matter within a specified period of time, and may order it to transfer its equity in the futures company.

Until the shareholder rectifies its violation of the law and transfers its equity in the futures company in accordance with the requirements of the preceding paragraph, the State Council's futures regulatory authority may restrict its shareholder rights.

Article 62: In the event an extraordinary circumstance arises in the futures market, the State Council's futures regulatory authority may take necessary measures to deal with the risks.

Article 63: The trading software and settlement software of a futures company shall satisfy the requirements of prudent operations and risk management by futures companies and the relevant provisions of the State Council's futures regulatory authority on the monitoring of the safe custody of futures margins. If the trading software or settlement software of a futures company fails to satisfy requirements, the State Council's futures regulatory authority shall have the right to require it to improve or replace such software.

The State Council's futures regulatory authority may require the supplier of the trading software or settlement software of a futures company to provide relevant information on the software, and the supplier shall give its cooperation. The State Council's futures regulatory authority shall bear an obligation of confidentiality in respect of the relevant information provided by the supplier.

Article 64: If a futures company is involved in a material lawsuit or arbitration, or if its equity is frozen or used to provide security, or if another material event occurs, it, the relevant shareholders and its de facto controller shall submit a written report thereon to the State Council's futures regulatory authority within five days from the date of occurrence of such event.

Article 65: When an accounting firm, law firm, asset appraisal institution or other such intermediary service organization provides relevant services to a relevant market participant, such as a futures exchange and futures company, it shall comply with futures laws and administrative regulations and relevant state provisions, and provide relevant information as required by the State Council's futures regulatory authority.

Article 66: The State Council's futures regulatory authority shall establish a regulatory information sharing, coordination and cooperation mechanism with relevant departments.

The State Council's futures regulatory authority may establish regulatory cooperation mechanisms with the futures regulatory authorities of other countries or regions to implement cross-border oversight.

Article 67: The working personnel of the State Council's futures regulatory authority, futures exchanges, institutions responsible for monitoring the safe custody of futures margins, futures margin custody banks and other such relevant work units shall loyally perform their duties, handle matters in accordance with the law, act impartially and with integrity, maintain the confidentiality of state secrets and the trade secrets of relevant parties and may not use the advantages of their positions to seek improper gains.

PART SEVEN: LEGAL LIABILITY

Article 68: A futures exchange or a non-futures company clearing member shall be given a rectification order, a warning and have its illegal income confiscated if:

(1) it violates provisions in accepting members;

(2) it violates provisions in collecting handling fees;

(3) it violates provisions in using or distributing revenue;

(4) it fails to publish market updates or issue forecast price information in accordance with provisions;

(5) it fails to perform its reporting obligations to the State Council's futures regulatory authority in accordance with provisions;

(6) it fails to submit relevant documents and materials to the State Council's futures regulatory authority in accordance with provisions;

(7) it fails to establish a sound clearing fund system;

(8) it fails to allocate funds for, manage and use its risk reserve in accordance with provisions;

(9) it violates the provisions of the State Council's futures regulatory authority on the monitoring of the safe custody of futures margins;

(10) it restricts members' total volume of delivered physical goods;

(11) it employs unqualified futures practitioners; or

(12) it commits another act of violation as specified by the State Council's futures regulatory authority.

If a futures exchange or a non-futures company clearing member commits any of the acts mentioned in the preceding paragraph, the supervisors directly in charge and other directly responsible persons shall be subjected to disciplinary sanctions and a fine of not less than Rmb10,000 and not more than Rmb100,000.

If a futures exchange or a non-futures company clearing member commits the act mentioned in Item (2) of the first paragraph of this Article, it shall be ordered to return the excess collected handling fees.

If an institution responsible for monitoring the safe custody of futures margins commits any of the acts specified in Item (5), (6), (9), (11) or (12) of the first paragraph of this Article, punishments and penalties shall be imposed in accordance with the first and second paragraphs of this Article. If a futures margin custody bank commits any of the acts specified in Item (9) or (12) of the first paragraph of this Article, punishments and penalties shall be imposed in accordance with the first and second paragraphs of this Article.

Article 69: A futures exchange or a non-futures company clearing member shall be given a rectification order, a warning, have its illegal income confiscated, be subjected to a fine of not less than one time and not more than five times its illegal income or, if it did not have any illegal income or the illegal income was less than Rmb100,000, a fine of not less than Rmb100,000 and not more than Rmb500,000 and, in serious cases, ordered to suspend operations and undergo rectification if:

(1) it conducts any matter listed under Article 13 hereof without approval;

(2) it permits members to conduct futures trading without a sufficient margin;

(3) it directly or indirectly participates in futures trading or engages in business unrelated to its functions in violation of provisions;

(4) it violates provisions in collecting margins or diverts margins;

(5) it forges, alters or fails to preserve futures transaction, settlement and delivery documentation in accordance with provisions;

(6) it fails to establish or implement a daily settlement system, price limit system, position limit system or reporting limits system;

(7) it refuses or hampers supervision and inspection of the State Council's futures regulatory authority; or

(8) it commits another act of violation as specified by the State Council's futures regulatory authority.

If a futures exchange or a non-futures company clearing member commits any of the acts mentioned in the preceding paragraph, the supervisors directly in charge and other directly responsible persons shall be subjected to disciplinary sanctions and a fine of not less than Rmb10,000 and not more than Rmb100,000.

If an institution responsible for monitoring the safe custody of futures margins commits any of the acts specified in Item (3), (7), or (8) of the first paragraph of this Article, punishments and penalties shall be imposed in accordance with the first and second paragraphs of this Article.

Article 70: A futures company shall be given a rectification order, a warning, have its illegal income confiscated, be subjected to a fine of not less than one time and not more than three times its illegal income or, if it did not have any illegal income or the illegal income was less than Rmb100,000, a fine of not less than Rmb100,000 and not more than Rmb300,000 and, in serious cases, ordered to suspend operations and undergo rectification or have its futures business permit revoked if:

(1) it accepts commissions from work units or individuals who do not meet the specified conditions;

(2) it permits customers to conduct futures trading without a sufficient margin;

(3) it conducts any matter listed under Article 19 or 20 hereof without approval;

(4) it engages in activities unrelated to futures business in violation of provisions;

(5) it engages in or in a disguised manner engages in futures business for its own account;

(6) it provides financing to its shareholders, de facto controller or other affiliated parties or provides security for third parties;

(7) it violates the provisions of the State Council's futures regulatory authority on the monitoring of the safe custody of futures margins;

(8) it fails to perform its reporting obligations with or submit relevant documents or information to the State Council's futures regulatory authority in accordance with provisions;

(9) its trading software or settlement software fails to satisfy the requirements of prudent operations and risk management by futures companies or the provisions of the State Council's futures regulatory authority on the monitoring of the safe custody of futures margins;

(10) it fails to allocate funds for, manage or use its risk reserve in accordance with provisions;

(11) it forges, alters or fails to preserve futures transaction, settlement and delivery documentation in accordance with provisions;

(12) it employs unqualified futures practitioners;

(13) it forges, alters, leases out, lends, purchases or sells its futures business permit or business licence;

(14) it conducts mixed code trading;

(15) it refuses or hampers the supervision and inspection of the State Council's futures regulatory authority; or

(16) it commits another act of violation as specified by the State Council's futures regulatory authority.

If a futures company commits any of the acts specified in the preceding paragraph, the supervisors directly in charge and other directly responsible persons shall be given a warning and fined not less than Rmb10,000  and not more than Rmb50,000 and, in serious cases, have their qualifications for their positions and/or futures practitioners' qualifications suspended or revoked.

If a firm engaging in futures business other than a futures company commits any of the acts specified in Item (8), (12), (13), (15) or (16) of the first paragraph of this Article, punishment shall be imposed in accordance with the first and second paragraphs of this Article.

If a shareholder, the de facto controller or other affiliated party of a futures company appoints another party or accepts the appointment of another party to hold or manage the equity of the futures company without approval, refuses to cooperate in an inspection by the State Council's futures regulatory authority or refuses to perform its reporting obligations or provide relevant information and data in accordance with provisions, or if the information or data it submits or provides contains false or misleading statements or material omissions, punishment shall be imposed in accordance with the first and second paragraphs of this Article.

Article 71: A futures company shall be given a rectification order, a warning, have its illegal income confiscated, be subjected to a fine of not less than one time and not more than five times its illegal income or, if it did not have any illegal income or the illegal income was less than Rmb100,000, a fine not less than Rmb100,000 and not more than Rmb500,000 and, in serious cases, ordered to suspend operations and undergo rectification or have its futures business permit revoked if it commits one of the following acts of fraud against a customer:

(1) it guarantees profits to a customer or fails to present to it a risk explanation in accordance with provisions;

(2) in its brokering business, it agrees with a customer to share returns or jointly bear risks;

(3) it fails to accept instructions from a customer in accordance with provisions or fails to conduct futures transactions in accordance with a customer's instructions;

(4) it conceals material matters or uses other illegitimate means to inveigle a customer into issuing transaction instructions;

(5) it provides false statements to customers concerning their transaction returns;

(6) it fails to transmit a customer's transaction instructions to the futures exchange;

(7) it diverts customers' margins;

(8) it fails to open margin accounts with a futures margin custody bank in accordance with provisions or transfers a customer's margins in violation of provisions; or

(9) it commits another act of fraud against customers as specified by the State Council's futures regulatory authority.

If a futures company commits any of the acts mentioned in the preceding paragraph, the supervisors directly in charge and other directly responsible persons shall be given a warning and a fine of not less than Rmb10,000 and not more than Rmb100,000 and, in serious cases, have their qualifications for their positions and/or futures practitioners' qualifications suspended or revoked.

If a work unit or individual fabricates and disseminates false information concerning futures transactions, disrupting the futures trading market, it/he/she shall be punished in accordance with the first and second paragraphs of this Article.

Article 72: If a futures company, other futures business firm, non-futures company clearing member or futures margin custody bank provides false application documents or takes other fraudulent means to conceal material facts in order to fraudulently obtain a futures business permit, such permit shall be revoked and its illegal income shall be confiscated.

Article 73: If an insider with insider information on futures trading or a person who illegally obtains insider information on futures trading uses such information to engage in futures trading or discloses such information to a third party causing that third party to use the insider information to engage in futures trading before information with a major impact on futures trading prices is publicly disclosed, he/she shall be subjected to confiscation of his/her illegal income and a fine of not less than one time and not more than five times the illegal income. If he/she did not have any illegal income or the illegal income was less than Rmb100,000, he/she shall be fined not less than Rmb100,000 and not more than Rmb500,000. If a work unit engages in insider trading, its supervisors directly in charge and other directly responsible persons shall be given a warning and fined not less than Rmb30,000 and not more than Rmb300,000.

If a member of the working personnel of the State Council's futures regulatory authority, a futures exchange or institution responsible for monitoring the safe custody of futures margins engages in insider trading, he/she shall be subjected to a heavier punishment.

Article 74: Any work unit or individual shall be given a rectification order, have its/his/her illegal income confiscated, and be subjected to a fine of not less than one time and not more than five times the illegal income or, if there was no illegal income or the illegal income was less than Rmb200,000, a fine of not less than Rmb200,000 and not more than Rmb1,000,000 if it/he/she manipulates futures trading prices by:

(1) singly or in conspiracy concentrating dominant funds, dominant position or using a dominance of information to jointly or successively buy and sell contracts and manipulate futures trading prices;

(2) maliciously colluding to mutually conduct futures trading at a predetermined time and price and in a predetermined manner, thereby influencing futures trading prices or futures trading volume;

(3) using oneself as a trading partner, buying from oneself and selling to oneself, thereby influencing futures trading prices or futures trading volume;

(4) hoarding spots in order to influence futures market quotations; or

(5) committing another act of manipulating futures trading prices as specified by the State Council's futures regulatory authority.

If a work unit commits any of the acts mentioned in the preceding paragraph, its supervisors directly in charge and other directly responsible persons shall be given a warning and fined not less than Rmb10,000 and not more than Rmb100,000.

Article 75: If a delivery warehouse commits any of the acts specified in the second paragraph of Article 39 hereof, it shall be given a rectification order, a warning, have its illegal income confiscated, be subjected to a fine of not less than one time and not more than  five times its illegal income or, if it did not have any illegal income or the illegal income was less than Rmb100,000, a fine of not less than Rmb100,000 and not more than Rmb500,000 and, in serious cases, the futures exchanges shall be ordered to suspend or revoke its delivery warehouse qualifications. The supervisors directly in charge and other directly responsible persons shall be given a warning and fined not less than Rmb10,000 and not more than Rmb100,000.

Article 76: If a state-owned or state controlled enterprise engages in futures trading in violation of these Regulations or the relevant provisions of the State Council's state-owned asset regulatory authority or other relevant departments on the entry by enterprises into the futures market with state-owned assets, or if a work unit or individual engages in futures trading by using loan proceeds or fiscal funds in violation of provisions, it/he/she shall be given a warning, have its/his/her illegal income confiscated, be subjected to a fine of not less than one time and not more than five times its/his/her illegal income or, if it/he/she did not have any illegal income or the illegal income was less than Rmb100,000, a fine of not less than Rmb100,000 and not more than Rmb500,000. The supervisors directly in charge and other directly responsible persons shall be subjected to disciplinary sanctions ranging from demotion to dismissal.

Article 77: If a domestic work unit or individual violates provisions in engaging in overseas futures trading, it/he/she shall be ordered to rectify the matter, given a warning, have its/his/her illegal income confiscated and be subjected to a fine of not less than one time and not more than five times its/his/her illegal income; if there was no illegal income or if the illegal income was less than Rmb200,000, a fine not less than Rmb200,000 and not more than Rmb1,000,000. If the circumstances are serious, its/his/her overseas futures trading shall be suspended. The supervisors directly in charge and other directly responsible persons shall be given a warning and fined not less than Rmb10,000 and not more than Rmb100,000.

Article 78: If a work unit or individual illegally establishes or in a disguised manner establishes a futures exchange, futures company or other firm that engages in futures business, or engages in futures business without authorization, or organizes disguised futures trading activities, the same shall be shut down, its/his/her illegal income shall be confiscated and it/he/she shall be fined not less than one time and not more than five times its/his/her illegal income; if there was no illegal income or if such illegal income was less than Rmb200,000, it/he/she shall be fined not less than Rmb200,000 and not more than Rmb1,000,000. The supervisors directly in charge and other directly responsible persons shall be given a warning and fined not less than Rmb10,000 and not more than Rmb100,000.

Article 79: If the supplier of a futures company's trading software or settlement software refuses to cooperate in an investigation by the State Council's futures regulatory authority, or fails to provide relevant information on the software to the State Council's futures regulatory authority in accordance with provisions, or if the information on the software that it provides contains false statements or material omissions, it shall be ordered to rectify the matter and fined not less than Rmb30,000 and not more than Rmb100,000. Its supervisors directly in charge and other directly responsible persons shall be given a warning and fined not less than Rmb10,000 and not more than Rmb50,000.

Article 80: If an accounting firm, law firm, asset appraisal institution or other such intermediary service organization fails to act with due diligence, resulting in the documents it issues containing false records, misleading statements or material omissions, it shall be ordered to rectify the matter, its income from the business shall be confiscated, its relevant business permit shall be suspended or revoked and it shall be fined not less than one time and not more than five times the income from the business. The supervisors directly in charge and other directly responsible persons shall be given a warning and fined not less than Rmb30,000 and not more than  Rmb100,000.

Article 81: If any work unit or individual seriously violates the provisions herein, the State Council's futures regulatory authority shall declare that that person, work unit or the persons directly responsible in that unit are forbidden from entering the futures market.

Article 82: If a member of the working personnel of the State Council's futures regulatory authority, a futures exchange, institution responsible for monitoring the safe custody of futures margins, futures margin custody bank or other such relevant work unit divulges state secrets or the trade secrets of a member or customer to which he/she is privy, practises favouritism, is derelict in his/her duties, abuses his/her authority or accepts bribes, he/she shall be subjected to administrative penalties or disciplinary sanctions in accordance with the law.

Article 83: If a criminal offence is established from a violation of these Regulations, legal liability shall be pursued in accordance with the law.

Article 84: Administrative penalties for violations of these Regulations shall be decided by the State Council's futures regulatory authority. If such a violation impinges upon the purview of another relevant department, the State Council's futures regulatory authority shall handle the matter in concert with the other relevant department. If such violation falls within the purview of another relevant department, the State Council's futures regulatory authority shall transfer the matter to another relevant department for handling.

PART EIGHT: SUPPLEMENTARY PROVISIONS

Article 85: The meanings of the following terms herein are set forth below:

(1) The term "futures contract" means a standard contract uniformly formulated by the futures exchange specifying the delivery of a certain quantity of the subject matter at a certain time to a certain place in the future. Depending on the subject matter, futures contracts are divided into commodities futures contracts and financial futures contracts. The subject matter of a commodities futures contract may be agricultural products, industrial products, energy resources and other commodities as well as related index products. The subject matter of a financial futures contract may be negotiable securities, interest rates, exchange rates and other such financial products as well as related index products.

(2) The term "option contract" means a standard contract uniformly formulated by the futures exchange that specifies that the buyer has the right to buy or sell the specified subject matter (including futures contracts) at a certain price at a certain time in the future.

(3) The term "margin" refers to funds paid by a futures trader in accordance with specified standards and used for settlement and to ensure contract performance.

(4) The term "settlement" refers to fund settlement and transfer conducted upon the transaction profit and loss position of the parties to a transaction in accordance with the settlement price published by the futures exchange.

(5) The term "delivery" means the process whereby, at the maturity of a contract, the parties to the transaction complete a matured and open contract by transferring ownership of the subject matter specified in the contract or settling the cash difference at the specified settlement price in accordance with the rules and procedure of the futures exchange.

(6) The term "close a position" refers to the act whereby a futures trader buys or sells a contract equivalent in terms of commodity, quantity and delivery month to one he/she holds but with the transaction going in the opposite direction thereby concluding the futures transaction.

(7) The term "position" refers to the quantity of open contracts held by a futures trader.

(8) The term "position limit" refers to the largest position permitted to a futures trader by a futures exchange.

(9) The term "warehouse receipt" refers to the standardized certificate of taking delivery issued by the delivery warehouse and recognized by the futures exchange.

(10) The term "price limit" refers to the fluctuation band between the highest price and the lowest price at which contracts may trade in one trading day. An offer outside this band shall be deemed void and the transaction incapable of being concluded.

(12) The term "insider information" refers to as yet publicly undisclosed information that may have a significant effect on futures trading prices, and includes: policies formulated by the State Council's futures regulatory authority and other relevant departments that may have a significant effect on futures trading prices, decisions made by a futures exchange that may have a significant effect on futures trading prices, the funds and trading trends of a futures exchange's members and customers as well as other important information that the State Council's futures regulatory authority recognizes as having a pronounced effect on futures trading prices.

(13) The term "an insider with insider information" refers to persons who as a result of their administrative position, supervisory position or professional position or employees or specialized consultants who, in the course of performing their duties, may be in contact with or have access to insider information, including: the management personnel in a futures exchange as well as other practitioners who may have obtained insider information in the course of their duties, working personnel of the State Council's futures regulatory authority and other relevant departments and other persons specified by the State Council's futures regulatory authority.

Article 86: The State Council's futures regulatory authority may approve the establishment of a specialized futures clearance institution to perform clearance for a futures exchange and related duties, and bear the attendant legal liability.

Article 87: The measures for the administration of the establishment and acquisition of, and the taking of equity interests in, futures business firms in China by foreign institutions and the establishment of branches and sub-branches (including representative offices) in China by foreign futures business firms shall be formulated by the State Council's futures regulatory authority in concert with the State Council's department in charge of commerce, foreign exchange control department and other such relevant departments and implemented after approval by the State Council.

Article 88: The trading of futures in a trading venue (other than a futures exchange) approved by the State Council's futures regulatory authority shall be handled in accordance with the relevant provisions hereof.

Article 89: The conduct, without the approval of the State Council's futures regulatory authority, of centralized trading of standard contracts by an organization or market that has adopted the trading mechanisms set forth below or has the features of either of the trading mechanisms set forth below is deemed futures trading in a disguised manner:

(1) providing performance bonds for all buyers and sellers participating in the centralized trading;

(2) implementing a daily settlement system and margin system but charging a margin of less than 20% of the subject matter of the contract.

An organization or market that has adopted the trading mechanisms specified in the preceding paragraph or had the features of either of the trading mechanisms specified in the preceding paragraph prior to the implementation hereof shall rectify the matter by the deadline specified by the State Council's department in charge of commerce.

Article 90: Trading activities that are not futures trading but involve commodities or financial products shall be overseen by the relevant state departments, and these Regulations shall not apply thereto.

Article 91: These Regulations shall be effective as of April 15 2007. The Tentative Regulations for the Administration of Futures Trading promulgated by the State Council on June 2 1999 shall be repealed simultaneously.