Since 1980s, financial derivatives have experienced a rapid development process, and the international financial market is also colorful because of the appearance of financial derivatives. The growth rate of financial derivatives trading volume has greatly exceeded that of traditional financial products, and it has gradually become an important part and driving force of the international market. With the reform of RMB exchange rate system, interest rate marketization and non-tradable share reform in China, the time has come to develop financial derivatives in the domestic market. This paper analyzes the present situation, problems and development prospects of financial derivatives in China, and draws lessons from the experience of financial derivatives in the world, and puts forward countermeasures and suggestions for the development of financial derivatives in China.

[Keywords:] financial derivatives risk aversion financial innovation

Financial derivatives came into being and developed under the background of a new round of financial innovation in 1970s and early 1980s. In recent 20 years, the rapid development of financial derivatives has become one of the most remarkable and important features of the international financial market. According to the statistical report of the Bank for International Settlements (BIS), from mid-2004 to mid-2007, the global derivatives trading volume rose from $220 trillion to $5 16 trillion. The nominal value is increasing at a rate of 33% per year. Financial derivatives started late in China. In recent years, with the deepening of interest rate marketization and the reform of exchange rate formation mechanism in China, interest rate risk and exchange rate risk have become increasingly apparent. At the same time, financial institutions and enterprises are facing increasingly fierce competition. It is an inevitable choice for China's financial industry to improve the financial market system and develop financial derivatives.

I. Development Status of Financial Derivatives in China

1. Development of financial derivatives in China

Since the underground futures trading of a few institutions in the early 1990s, foreign exchange futures, treasury bonds futures, index futures and rights issue warrants have appeared in financial derivatives. During the period of 1992 ~ 1995, Shanghai and Hainan stock exchanges launched treasury bonds and stock index futures. Buy-out repurchase in 2004, inter-bank bond forward trading, RMB forward products, RMB swap and forward settlement system arrangement in 2005, etc. , which means that China's derivatives market has emerged. Since then, with the share-trading reform, various warrants have brought derivatives into the eyes of ordinary investors, and the warrant market has become the second largest market in the world after Hong Kong. On September 8, 2006, China Financial Futures Exchange was established in Shanghai, which opened the prelude to the development of financial derivatives market in China. Gold futures was listed in Gong Ming on June 5th+10/October 9th, 2008, which further improved the variety system of futures market. Except for oil, the main commodity futures in foreign mature markets are basically listed and traded in China.

2. The main problems of financial derivatives.

Although China's financial derivatives market has developed rapidly, it is still in its infancy and there are many problems.

(1) The market is not standardized enough.

Generally speaking, the specific management system of each financial derivative depends on its own situation, but as far as its general principles and regulations are concerned, it is consistent and standardized. This standardization is conducive to trading and can promote the further development of derivative products. The development of financial derivatives in China has not only failed to start in a standardized way, but also its supervision and management is in a chaotic state. First of all, in the multi-head management, the CSRC, the People's Bank of China, the National Development and Reform Commission, the Ministry of Finance, local governments and the Shanghai and Shenzhen Stock Exchanges all enjoy certain management rights. This leads to multiple policies, unstable market policies, unequal competition in exchanges and chaotic management. Secondly, the trading system and procedures are not standardized.

(2) The size of the spot market does not match.

Due to the derivative nature of derivative products, the development of any derivative product market must be guaranteed by a mature and perfect spot market. Without a reasonable spot market size, there will be no reasonable market price. The smaller the market capacity, the easier it is to cause artificial price control. In the treasury bond futures market, many parties take advantage of the "bottleneck effect" of the insufficient circulation of cash bonds, and at the same time, rely on the advantages of funds to raise the price of cash bonds to match, so that the margin of short sellers keeps increasing and flows into their own accounts, forming markets of "multiple short positions", "3 14 storm", "327 storm" and "3 19 storm"

(3) the product design is unreasonable

The basic function of financial derivatives is to transfer risks. However, practice shows that the risk in multi-variety application has not been effectively transferred, but has expanded. This is determined by the "double-edged sword" characteristics of financial derivatives, and the fuse that leads to our useless and harmful applications is unreasonable product design. For example:

Treasury bond futures. One of the design functions of this product is to avoid interest rate risk, but because the interest rate in China is not market-oriented and the maturity price of national debt is fixed, the spot transaction of national debt is risk-free. In this case, treasury bond futures have become a means of speculation, and the treasury bond futures market has become a gambling place for major brokers.

Stock warrants. The stock warrant market is the largest financial derivative in China. The purpose of its introduction is mainly to meet the comprehensive cost needs of non-tradable shareholders in the current share-trading reform, such as reducing the consideration, which has a strong administrative and welfare color. This product does not have the hedging function and price discovery function to avoid systemic risks in the market, and has been regarded as a stupid game tool since its listing.

(4) Lack of real market equilibrium price

In China's financial market, most financial prices are not completely market equilibrium prices, which are different from the price difference between equilibrium prices, that is, the struggle between hot money and speculators, which will increase the risk scope and weaken its function of avoiding risks and finding prices. The country still has strict foreign exchange control, and the free convertibility and interest rate marketization under RMB capital account have not yet been realized. CHIBOR, the national unified interbank lending rate, has appeared in 1996, but it is far less authoritative than LIBOR interest rate in Britain, and it is not a real market equilibrium interest rate. In addition, the state also controls the deposit and loan interest rates of banks and the issuance interest rates of government bonds, which cannot form a real market interest rate.

(5) The information disclosure system is not perfect.

The price of financial derivatives is closely related to the prices of basic financial derivatives such as interest rate, exchange rate and stock price. China is a country with strict control over financial prices, and the degree of marketization of financial products is not high. National policies have a great influence on the price changes of financial products, and are closely related to the disclosure of major information and the announcement of fiscal and financial policies. In countries with mature market economy, there are strict procedures for the disclosure of major information and the publication of relevant policies. Leakers and rumourers will be severely punished to ensure fairness, justice and openness of transactions. China's securities laws and regulations limit the issuer's obligation to clarify rumors only to clarify rumors that appear in "public media", which is obviously too narrow; The definition of "important issues" is not clear, and the concept is very broad. In addition, the frequency of information disclosure is too low.

Second, the development of financial derivatives in China countermeasures and suggestions

1. Basic principles and mode selection for developing China's financial derivatives market.

Regarding the guiding ideology of developing financial derivatives in China, from a macro perspective, we should adhere to the basic principles of marketization and administrative assistance. At the micro level, the promotion order of financial derivatives should be adapted and coordinated with the process of economic and financial marketization reform in China. At the same time, the development of financial derivatives needs the cooperation of market foundation, investor structure, laws and regulations to prevent the adverse effects of risks. From the microscopic point of view, we should adhere to the principle of controlling risk first and speculating for profit second.

The mode selection of financial derivatives market development in China should start from compulsory evolution, forming a virtuous circle and interaction from compulsory evolution mode to induced evolution mode. The experience of the induced evolution model adopted by the United States and Britain shows that in the financial derivatives market of the developed countries, financial innovators get monopoly profits because they meet the large-scale hedging demand of the market, which can make up for the cost of innovation, and the financial derivatives market develops rapidly. However, due to the public product characteristics of financial derivatives, after the induced evolution to a certain stage, it may not be possible to guarantee sufficient innovation in the market. For the late-developing countries, the experience of forced evolution mode adopted by South Korea and Singapore shows that it may be a better choice to adopt forced evolution mode when the late-developing countries gain successful experience, so that the late-developing countries can develop at a faster speed.

2. Specific measures to develop financial derivatives in China.

(1) Steadily promote the internationalization of financial derivatives.

Financial derivatives are essentially an international competitive market. The opening of a country's derivatives market can be realized in two ways: first, allowing foreign capital to participate in domestic derivatives trading; The second is to allow domestic enterprises to directly enter the international derivatives market, or to act as agents for foreign business through brokerage companies.

Judging from the future development of China's derivative market, to achieve the goal of internationalization, it needs to go through two stages of development: one is the domestic operation stage centered on opening domestic financial derivatives. This is the primary stage, and we should focus on developing derivative products that meet the needs of society, improve trading rules and supervision systems, and cultivate trading subjects in derivative markets. The second is the internationalization stage of financial derivatives. At this stage, the restrictions on the participation of enterprises and financial institutions in the international derivatives market should be liberalized, and at the same time, foreign capital should be allowed to participate in the China derivatives market under certain conditions.

(2) Scientifically arrange and develop the trading order of financial derivatives.

There are many kinds of financial derivatives, and different derivatives need different development foundations and conditions, so it is impossible to have and mature at the same time. Therefore, the development of financial derivatives trading should be arranged in a scientific and orderly manner, with the first launch when the time is ripe, and the conditions should be actively created when the time is not ripe, both actively and steadily.

First of all, give priority to the development of on-exchange transactions and make proper use of off-exchange transactions. The advantage of OTC trading is that it can better meet the needs of large investment institutions. Compared with the over-the-counter market, the exchange has greater advantages in reputation, risk control, market organization, system design and transaction settlement. Standardized derivatives traded on exchanges are more transparent, more liquid and lower in cost, which not only helps participants to guard against and avoid risks, but also helps market supervision. Therefore, it is in line with the reality of domestic financial market to give priority to the development of standardized financial derivatives led by exchanges. At the same time, more financial institutions and enterprises can be allowed to conduct over-the-counter transactions moderately.

Secondly, the development of financial futures precedes options and swaps. Judging from the development order of futures market, options developed after futures. To some extent, option is an advanced form of futures, and its purpose is to provide a hedging tool for futures trading. On the basis of summing up many years' experience in commodity futures operation, China should first introduce financial futures products, then determine the opportunity to gradually introduce financial options, swaps and other derivatives, and finally form a relatively complete financial derivatives system.

Thirdly, in the development of financial derivatives, we should take treasury bonds futures and stock index futures as the breakthrough. China's national debt and stock are quite large. Even if the current stock market is completely standardized, its price fluctuation is still inevitable. The introduction of stock index futures not only has market demand, but also can reduce unreasonable and irrational price fluctuations. China's national debt has many varieties, long maturity and large quantity. As long as interest rates fluctuate, the demand for hedging is strong. In addition, treasury bond futures are also conducive to finding forward interest rates and promoting long-term investment.