China Says Derivatives Can't Fund Securities Trading

Law360, New York (November 30, 2015, 3:55 PM EST) -- China's self-regulatory securities association has told brokerage firms to stop using over-the-counter derivatives as a tool to finance customers' investments in stock, finding that the practice adds to market risk, the nation's securities regulator said Friday.

The Securities Association of China has found that some securities firms are using swaps to fund stock trading, rather than using the derivatives to manage customers' risk as initially intended, the China Securities Regulatory Commission said. Zhang Xiaojun, a CSRC spokesperson, confirmed the SAC's clampdown on the practice at a Friday press conference, according to a transcript published by the CSRC.

OTC derivatives can still...

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