Close-out netting for China

Author: | Published: 14 Jan 2010

China is establishing an independent derivatives market that supports its unique economic model. It has forged ahead on this path over the past 12 months, albeit sometimes at its own expense. But one area in which China could follow international best practice in 2010 is close-out netting.

“I think that something will happen in 2010 or the next two years to strengthen certainty on close-out netting,” says Jane Jiang of Allen & Overy. “This could happen at a secondary legislative or judicial level. The pressure is building up and people are seeking clarification. Some action will be taken.”

This will be a relief to all those that deal with China’s derivatives market. The past 12 months have seen positive and negative developments, but all suggest China is not keen to simply accept international practice.

In March 2009, the National Association of Financial Market Institutional Investors...