The China Securities Regulatory Commission (CSRC) is soliciting public comment on proposed rules (Interim Measures) that would open Chinese futures markets to direct trading by non-Chinese persons apparently for both speculative and hedging purposes.
The Interim Measures, if adopted, will permit certain foreign persons and brokerage firms (defined respectively as Overseas Traders and Overseas Brokers) to trade "Specific Futures Contracts" that will be designated by the CSRC and listed for trading on China's futures exchanges. (). CSRC published the Interim Measures on December 31, 2014, and comments are due by January 31, 2015 in China (this likely means by 11:00 a.m. (ET) on January 31 in light of the time differences).
Crude oil futures contracts traded on a subsidiary of the Shanghai Futures Exchange (the Shanghai International Energy Exchange) appear likely to be the first beneficiary of the new rules.
Currently, only a stock index futures contract listed on the China Financial Futures Exchange is available for hedging purposes to a limited group of foreigners—so-called "qualified foreign institutional investors"—under very limited conditions.
Under the Interim Measures, Overseas Traders would be permitted to access Specific Futures Contracts either through Chinese or Overseas Brokers, or trade directly through exchange facilities, subject to exchange approval. Although Overseas Brokers may become members of authorized China futures exchanges to process trades of Overseas Traders, it appears that only local brokers can ultimately clear approved products for Overseas Traders. However, it may be possible for Overseas Brokers that establish or control entities in pilot free trade zones in China (one is located in Shanghai) to become clearing members. The proposed rules are not clear on this point.
CSRC, the relevant exchange, the China Futures Association (CFA) and the China Futures Margin Monitoring Center (CFMMC) would all play a role in monitoring aspects of trading by Overseas Traders and Brokers.
CFA is China's national self-regulatory organization for the futures industry, overseen by the CSRC. It functions very much like the US National Futures Association. CFMMC, a nonprofit corporation registered with the State Administration for Industry and Commerce and also overseen by the CSRC, is responsible for overseeing and providing early warning of potential issues with the handling of customer margin by Chinese futures brokers.
Among other things, qualified Overseas Traders would have to satisfy eligibility requirements established by CSRC and the relevant exchange. Authorized Overseas Brokers would have to be subject to oversight by a regulator in their home jurisdiction. The regulator would have to enter into a memorandum of understanding with CSRC governing cooperation where the Overseas Broker is a member of an authorized China futures exchange and directly facilitates the trading by Overseas Traders. Relevant futures exchanges, domestic futures companies and Overseas Brokers would have to establish and administer a suitability system in connection with trading by Overseas Traders.
Trades placed by Overseas Traders must "follow the principle of free will." This appears to suggest that accounts traded for Overseas Traders by third party managers will be permitted provided they are appropriately authorized.
CSRC contemplates a large trader reporting regime in connection with futures positions, and would require Overseas Traders and Brokers to submit to regular or random on-site inspections.
Separately, the International Board of the Shanghai Pilot Free Trade Zone was launched by the Shanghai Gold Exchange in September 2014. It trades both spot and forward gold and is accessible to qualified international investors; the Exchange does not offer futures contracts.
The following is a translation of the Interim Measures as well as drafting notes provided by the CSRC:
Interim Measures on Administration of Trading of Specific Futures Contracts in China by Overseas Traders and Overseas Brokers
(Draft for Comment)
Article 1 [Purpose and Basis] These Measures are adopted, in accordance with the Regulations on Administration of Futures Trading and other related laws and regulations, for the purpose of promoting the opening-up of the domestic futures market, strengthening the oversight of trading of Specific Futures Contracts in China by Overseas Traders and Overseas Brokers, maintaining the efficient operation of the domestic futures market, protecting legitimate rights and interests of traders, and facilitating innovation and development of the domestic futures market.
Article 2 [Definitions] Overseas Traders and Overseas Brokers shall comply with these Measures when trading Specific Futures Contracts in China and conducting other related activities.
For the purpose of these Measures, an "Overseas Trader" refers to a non-natural legal person or other economic organization duly established outside the territory of the People's Republic of China or a natural person with foreign citizenship, that trades futures contracts for its own account.
For the purpose of these Measures, an "Overseas Broker" refers to a financial institution which is duly established outside the territory of the People's Republic of China and is qualified to accept funds and orders for trades from traders and to conduct futures trading in its own name for traders, with such qualifications being recognized by the futures regulatory authority(ies) of the country (region) where the Overseas Broker is located.
For the purpose of these Measures, the "Specific Futures Contracts in China" shall be determined and published by the China Securities Regulatory Commission (hereinafter referred to as "CSRC").
Article 3 [Supervision and Administration] CSRC and its regional offices shall supervise and administer the trading of Specific Futures Contracts in China by Overseas Traders and Overseas Brokers.
Futures exchanges shall oversee the trading of Specific Futures Contracts in China and the related business activities in accordance with their rules.
The China Futures Association shall oversee the industry regarding the trading of Specific Futures Contracts in China and the related business activities in accordance with its self-oversight rules.
The China Futures Margin Monitoring Center Co., Ltd. (hereinafter referred to as "CFMMC") shall monitor and supervise the trading of Specific Futures Contracts in China and the related business activities in accordance with relevant laws.
Article 4 [Compliance with Laws and Anti-Money Laundering Obligations] Overseas Traders and Overseas Brokers shall comply with the laws and regulations of the People's Republic of China and these Measures, and shall effectively perform the obligations of anti-money laundering, anti-terrorism financing, anti-tax evasion, etc.
Article 5 [Participation Mode for Overseas Traders] Overseas Traders may use Chinese futures companies (hereinafter, the "Futures Companies") or Overseas Brokers to trade Specific Futures Contracts in China.
With the approval of futures exchanges, qualified Overseas Traders may trade directly Specific Futures Contracts in China on the futures exchanges.
An Overseas Trader that directly conducts trading as provided in the preceding paragraph shall satisfy the following conditions:
- the country (region) where it is located shall have sound legal and regulatory systems;
- it shall have sound financial condition, good credit standing and sufficient liquid assets;
- it shall have a robust governance structure and sound internal control system, and its business standards shall be consistent with industry custom; and
- other conditions as may be specified by futures exchanges.
Article 6 [Participation Mode for Overseas Brokers] An Overseas Broker that has been engaged by an Overseas Trader may use a Futures Company to trade Specific Futures Contracts in China. The Futures Company that accepts such appointment shall trade in its own name for the Overseas Broker.
With the approval of futures exchanges, qualified Overseas Brokers may open accounts for Overseas Traders and directly trade Specific Futures Contracts in China on the futures exchanges in their own name for the Overseas Traders.
An Overseas Broker that directly conducts the trading as provided in the preceding paragraph shall meet the requirements set forth in Paragraph 3 of Article 5 of these Measures, and the futures regulatory authorities of the country (region) where the Overseas Broker is located shall have executed a Memorandum of Understanding on Cooperation in Supervision and Administration with CSRC.
An Overseas Broker that satisfies the conditions set forth in Paragraph 3 of this Article may apply to CSRC for a pilot establishment of a wholly owned or controlled Futures Company in the pilot free trade zone. Such Futures Companies shall only be allowed to be used for trading Specific Futures Contracts in China for Overseas Traders and Overseas Brokers.
Article 7 [Regulations on Prohibited Business] Overseas Brokers shall not trade futures in China for domestic traders or entities or individuals set forth in Article 26 of the Regulations on Administration of Futures Trading.
Article 8 [Basis for Qualifications to Trade Directly] With respect to qualifications of the Overseas Traders and Overseas Brokers that trade directly on futures exchanges, the futures exchanges shall prescribe conditions and procedures for obtaining and terminating such qualifications, and specify rights and obligations of such qualified Overseas Traders and Overseas Brokers.
Article 9 [Principle of Assuming One's Own Risks] Overseas Traders that trade Specific Futures Contracts in China shall comply with the self-oversight rules of futures exchanges, follow the principles of "trading at one's own discretion, assuming one's own risks, receiving one's own profits and bearing one's own losses," and shall be responsible for contracts performance and the trading results.
Article 10 [Overseas Traders' Obligations to Open Accounts] Overseas Traders shall open accounts under true and lawful identification, and shall provide true copies of lawful and valid supporting documents for foreign citizenship, foreign legal person qualification or other economic organization qualification. The Overseas Traders' identity supporting documents and requirements thereof shall be separately prescribed by CFMMC.
Article 11 [Unified Account Opening] An Overseas Broker that trades Specific Futures Contracts in China for Overseas Traders shall complete account opening procedures for the Overseas Traders and separately apply for a trading code for each such Overseas Trader in accordance with the Provisions on Administration of Futures Client Accounts Opening and the rules issued by CFMMC, and shall not conduct omnibus transactions.
A Futures Company that is engaged by Overseas Brokers shall, in accordance with the rules issued by CFMMC, provide any necessary assistance to Overseas Brokers in completing the procedures as set forth in the preceding paragraph.
An Overseas Trader that trades directly on a futures exchange shall open an account with the futures exchange and apply for a trading code. The Futures exchange shall submit relevant materials to CFMMC for a record prior to the trading.
Article 12 [Suitability Management] Suitability systems for traders shall apply to trading of Specific Futures Contracts in China. Futures exchanges, Futures Companies and Overseas Brokers shall implement suitability policies and procedures for traders. Overseas Traders shall comply with the suitability systems for traders.
Article 13 [Basic Rules for Brokerage] Overseas Brokers that trade for Overseas Traders shall provide a risk disclosure statement to the Overseas Traders in advance, enter into written contracts with the Overseas Traders, and shall not conduct futures trading without or inconsistent with the Overseas Traders' authorization, nor shall they conceal material matters or induce Overseas Traders to send orders for trades by other improper means.
Article 14 [Operation Requirements] Overseas Brokers that trade directly on futures exchanges shall establish, and strictly implement business management rules and risk management systems, observe information disclosure rules, and ensure the safety of Overseas Traders' margins.
Article 15 [Arrangement of Settlement, Collection of Margins, Notice of Settlement Results, Mandatory Closing-out of Positions, and Breach] A futures exchange that performs the functions of clearing shall, acting as a Central Counterparty, uniformly organize the clearing of trading of Specific Futures Contracts in China. Overseas Traders and Overseas Brokers shall, in accordance with the rules prescribed by the futures exchange, use qualified Futures Companies or other organizations to conduct settlement. Articles 29, 34, 35, and 37 of the Regulations on Administrations of Futures Trading on clients and futures companies shall apply to such settlement.
The term "Central Counterparty" specified in the preceding paragraph refers to a legal person that is involved in transactions between the futures trading parties after conclusion of the transaction, becoming the buyer to every seller and the seller to every buyer, conducts the clearing on a net basis, and provides centralized performance guarantee for futures trading.
Article 16 [Futures Settlement Account] Overseas Traders and Overseas Brokers that trade directly on futures exchanges or use Futures Companies to trade Specific Futures Contracts in China shall open qualified bank accounts in China and designate such bank accounts as futures settlement accounts.
Article 17 [Depository and Operation of Margins] Overseas Traders and Overseas Brokers shall comply with the margin depository provisions prescribed by CSRC. Futures Companies shall deposit margins collected from Overseas Traders and Overseas Brokers, which use the Futures Companies to conduct settlement, into the Futures Companies' special margin accounts. The Futures Companies shall manage the margins from domestic clients and from overseas clients under separate accounts. Funds transfer of domestic accounts among futures exchanges, Futures Companies, and Overseas Traders and Overseas Brokers as referenced in Article 16 of these Measures shall be conducted through special settlement accounts, special margin accounts and futures settlement accounts.
Article 18 [Reporting of Large Trader Positions] Where positions held by an Overseas Trader or Overseas Broker reach the reporting standard as specified by the futures exchange, it shall report such positions to the future exchange. In case of Overseas Traders' failure to report, the Futures Companies or Overseas Brokers that trade for such Overseas Traders shall report to the futures exchanges.
Article 19 [Guarantee of Performance] Margins shall only be used to secure the performance of futures contracts or option contracts; except as otherwise stipulated by the laws, it is strictly prohibited to use margins for other purposes.
Where an Overseas Trader or Overseas Broker is taken over by a receiver, becomes bankrupt or goes into liquidation, its margins shall be preferentially used to satisfy its obligations regarding outstanding futures contracts and options contracts at futures exchanges.
Article 20 [Measures] Upon occurrence of events in the futures market as described in Articles 85 and 87 of the Measures for Administration of Futures Exchanges, futures exchanges may take actions against Overseas Traders and Overseas Brokers in accordance with the rules on clients and members.
Article 21 [Mediation of Disputes] Any dispute between Futures Companies and Overseas Traders or Overseas Brokers over futures business may be submitted to the China Futures Association, the relevant futures exchange and other mediation organizations for mediation.
Article 22 [Regular Reporting by Futures Companies] Futures Companies shall report in their monthly and annual reports information regarding their trading of Specific Futures Contracts in China for Overseas Traders and Overseas Brokers.
Chief Risk Officers of Futures Companies shall supervise and inspect activities of their companies in relation to trading of Specific Futures Contracts in China, and perform obligations of urging the companies' rectification, reporting, etc.
Article 23 [Submission of Specified Materials] CSRC and its regional offices may, pursuant to their supervision functions, request Futures Companies, Overseas Traders and Overseas Brokers to provide the following information or written materials, and may conduct necessary investigation and inspection:
- names, nationality, valid identity documents (number), contact information and other relevant information, source of funds, etc. of ultimate beneficiaries of the accounts and all the sub-accounts of the Overseas Traders and Overseas Brokers;
- names, nationality, valid identity documents (number), contact information and other relevant information of persons who give instructions to the accounts and all the sub-accounts of the Overseas Traders and Overseas Brokers;
- detailed materials regarding the transfer and use of funds in the accounts and all the sub-accounts of the Overseas Traders and Overseas Brokers;
- detailed materials regarding transactions in the accounts and all the sub-accounts of the Overseas Traders and Overseas Brokers; and
- other materials that may be requested by CSRC according to the principle of prudent supervision.
Article 24 [Interim Report] Upon the occurrence of any of the following material events, a Futures Company shall report to the regional office of CSRC of its domicile within five working days after it learns such situation, or otherwise in accordance with the relevant regulations:
- the Overseas Traders or Overseas Brokers violate rules, are taken over by receivers, become bankrupt or suffer other risk events;
- the Overseas Traders or Overseas Brokers are involved in any disputes, arbitrations or actions in relation to futures; or
- other situations affecting the Overseas Traders' or Overseas Brokers' trading of Specific Futures Contracts in China.
Reports of the Futures Companies shall include contents such as cause and current status of the events, potential consequences, and plans or measures to address such events, etc.
Article 25 [Supervision and Administration over Futures Companies] In the event a Futures Company and its staff violate these Measures, in accordance with relevant provisions of the Regulations on Administration of Futures Trading, supervision and administrative measures such as ordering the rectification of an issue within a specified period, conversation with and warning to senior officers ordering the replacement of responsible persons shall be adopted, and such violation shall be recorded in the credit record.
Article 26 [Requirements for Software] Trading and settlement software used by Overseas Traders and Overseas Brokers that trade directly on futures exchanges shall meet the requirements for risk management of the futures exchanges and the requirements of CSRC's regulations regarding supervision of margin depositories. In case the software fails to meet such requirements, CSRC shall have the right to require Overseas Traders and Overseas Brokers that trade directly on futures exchanges to improve or replace the software.
CSRC may require providers of trading or settlement software used by Overseas Traders and Overseas Brokers that trade directly on futures exchanges to provide materials in relation to the software, and the providers shall cooperate in providing such materials. CSRC shall keep confidential the relevant materials provided by such providers.
Article 27 [Onsite Inspection] CSRC and its regional offices may, pursuant to their supervision functions, conduct regular or irregular on-site inspection on trading of Specific Futures Contracts in China and related business activities by Overseas Traders or Overseas Brokers.
Article 28 [Legal Liabilities of Futures Exchanges] Where a futures exchange violates the regulations in allowing Overseas Traders or Overseas Brokers to trade directly on the futures exchange, it shall be penalized or punished according to Article 65 of the Regulations on Administration of Futures Trading.
In the event a futures exchange permits Overseas Traders or Overseas Brokers to trade directly on the futures exchange without sufficient margins, it shall be penalized in accordance with to Article 66 of the Regulations on Administration of Futures Trading.
Article 29 [Legal Liabilities of Overseas Brokers] Overseas Brokers that commit any of the acts as set out in Items 1, 7-9, 11 and 14-16, Paragraph 1 of Article 67 of the Regulations on Administration of Futures Trading shall be penalized in accordance with Paragraph 1 of Article 67 of the Regulations on Administration of Futures Trading.
Overseas Brokers that commit fraudulent acts as set out in Paragraph 1 of Article 68 of the Regulations on Administration of Futures Trading shall be penalized in accordance with Paragraph 1 of Article 68 of the Regulations on Administration of Futures Trading.
Article 30 [Legal Liabilities of Software Providers] If any provider of trading or settlement software used by Overseas Traders or Overseas Brokers that trade directly on futures exchanges refuses to cooperate with CSRC and its regional offices in their investigation, or fails to provide CSRC and its regional offices with relevant software materials according to the regulations, or provides false software materials or software materials with material omission, it shall be penalized in accordance with Article 76 of the Regulations on Administration of Futures Trading.
Article 31 [Administrative Penalties and Criminal Offenses] If any futures exchange, Futures Company, Overseas Trader or Overseas Broker conducts business in violation of relevant laws or is subject to major risks, which severely jeopardizes the orderly functioning of Chinese futures market and impairs the legal rights and interests of traders, then it shall be penalized in accordance with the Regulations on Administration of Futures Trading. If it is suspected of having committed a crime, it shall be referred to a judicial authority and prosecuted for its criminal liabilities according to the laws.
Article 32 [Cross-border Enforcement, Investigation and Punishment] If Overseas Traders or Overseas Brokers violate the Regulations on Administration of Futures Trading or relevant regulations issued by CSRC, CSRC shall conduct an investigation and impose punishment in accordance with the laws. Where assistance from regulatory authorities in the domicile of such Overseas Traders or Overseas Brokers is required, CSRC may conduct cross-border cooperation for supervision and administration with such regulatory authorities in accordance with cross-border cooperation mechanisms such as bilateral or multilateral Memorandum of Understanding for Cooperation in Supervision and Administration entered into by and between them.
Article 33 [Basis for Application to Futures Trading Markets] Where trading of Specific Futures Contracts in China and related business activities are conducted through other futures trading markets approved by CSRC, these Measures shall apply.
Article 34 [Application to Hong Kong, Macau and Taiwan] Where a non-natural legal person or other economic organization established in Hong Kong Special Administration Region, Macau Special Administration Region or Taiwan or a natural person with citizenship in Hong Kong Special Administration Region, Macau Special Administration Region or Taiwan trades Specific Futures Contracts in China, these Measures shall apply.
第三十五条【实施时间】本办法自 年 月 日起施行。
Article 35 [Effective Date] These Measures shall come into force as of [ ].
Drafting Notes to the Interim Measures on Administration of Trading of Specific Futures Contracts in China by Overseas Traders and Overseas Brokers (Draft for Comment)
I. Drafting Background
As the world's second largest economy, China manufactures, consumes and trades various bulk commodities. To meet the needs of national economic development and provide price discovery and risk management services of high quality and high efficiency for economic development, it is essential to attract Overseas Traders and Overseas Brokers to participate in trading on the Chinese futures market so as to improve the internationalization and pricing power of the Chinese futures market. The China Securities Regulatory Commission (hereinafter referred to as the "CSRC") has approved Shanghai Futures Exchange to organize crude oil futures trading on its international energy exchange center. An internationalized clearing platform will be established for trading of crude oil futures contracts, which are the first futures contracts of China that will be made available. The platform will accept Overseas Traders and Overseas Brokers in a comprehensive manner. Therefore, it is necessary to specially formulate administrative measures for permitting Overseas Traders and Overseas Brokers to trade specific futures contracts in China.
2012 年10 月24 日国务院公布了修订《期货交易管理条例》（以下简称《条例》）的决定，增加了第二十四条第二款："符合规定条件的境外机构，可以在期货交易所从事特定品种的期货交易。具体办法由国务院期货监督管理机构制定"的规定。根据《条例》第五条第一款"国务院期货监督管理机构对期货市场实行集中统一的监督管理"和第二十四条第二款的授权，中国证监会起草了《境外交易者和境外经纪机构从事境内特定品种期货交易管理暂行办法（征求意见稿）》（以下简称《办法》），对境外交易者和境外经纪机构从事境内特定品种期货交易的条件、参与规则、监督管理等事项进行规定。
II. Drafting Basis
The State Council promulgated the decision on amendment of the Regulations on Administration of Futures Trading (hereinafter referred to as the "Regulations") on October 24, 2012, which added Paragraph 2 to Article 24, reading: "An overseas organization that meets required conditions may trade specific futures contracts on futures exchanges, and specific measures therefor shall be formulated by the futures regulatory authority under the State Council." As authorized by Paragraph 1 of Article 5 of the Regulations which reads "The futures regulatory authority under the State Council shall conduct centralized and unified supervision and administration over the futures market" and Paragraph 2 of Article 24, CSRC has drafted the Interim Measures on Administration of Trading of Specific Futures Contracts in China by Overseas Traders and Overseas Brokers (Draft for Comment) (hereinafter referred to as the "Measures") to provide for the conditions, participation rules, supervision and administration, and other matters with respect to trading of specific futures contracts in China by Overseas Traders and Overseas Brokers.
III. Main Contents of the Measures
The Measures, which comprise 35 articles in total, specially provide for the trading of specific contracts in China by Overseas Traders and Overseas Brokers. The provisions of the Measures follow the logic of "General Provisions—Participation Mode—Basic Trading Rules—Supervision and Administration—Legal Liabilities." Provisions of the Measures regarding basic rules for futures trading, supervision and administration and other matters, being "department regulations," shall be implemented in accordance with applicable provisions of the Regulations. The Measures also provide for, as a supplement, certain matters in respect to market and corporate supervision and administration that are not covered in the Measures on Administration of Futures Exchanges and the Measures on Supervision and Administration of Futures Companies.
1. Determination of Specific Futures Contracts in China
Based on the current situation of China's commodities spot and futures market, the futures market will be opened in step-by-step manner. Taking into account the progress in the opening of the RMB Capital account, the level of participation by non-financial enterprises and financial institutions, the risk management capability of the futures market and other relevant factors, it is necessary to steadily and progressively open up futures contracts and constantly gain experience in the related supervision and administration. Crude oil futures contracts are the first category of futures contracts determined by the CSRC that may be traded by Overseas Traders and Overseas Brokers.
2. Multiple Participation Modes for Overseas Traders and Overseas Brokers
Overseas Traders may choose the following participation modes based on their own circumstances and business needs: Overseas Traders may trade specific futures contracts in China through a domestic futures company or an Overseas Broker; and with the approval of futures exchanges, qualified Overseas Traders may trade directly specific futures contracts in China on the futures exchanges.
Overseas Brokers may choose the following participation modes based on the circumstances: after being engaged by an Overseas Trader, an Overseas Broker may use a domestic futures company to trade specific futures contracts in China; and with the approval of futures exchanges, qualified Overseas Brokers may be engaged by Overseas Traders to directly trade specific futures contracts in China on the futures exchanges.
In addition, for the steady and sound development of the futures market, Overseas Brokers may only be used to trade specific futures contracts in China for Overseas Traders.
3. Basic Trading Rules, and Supervision and Administration
The Measures mainly specify major procedures with respect to trading of specific futures contracts in China, including requirements for account opening and business operation, settlement, requirements for collection and depositories of margins, reporting by large traders, mandatory closing-out of positions, default liabilities and disputes resolution.
The Measures also specify CSRC's functions for supervision and administration over trading of specific futures contracts in China and related business activities by Overseas Traders and Overseas Brokers, such as onsite inspection, investigations on and punishment for violations of laws and regulations, and cross-border enforcement of laws. Based on the existing requirements for supervision and administration of members of futures exchanges under the Regulations and the Measures on Administration of Futures Exchanges, the aforementioned provisions incorporate relevant contents into the Measures to regulate Overseas Traders and Overseas Brokers. In addition, the provisions in the Regulations applicable to clients shall also expressly apply to Overseas Traders for the purpose of the Measures.
4. Cross-Border Cooperation in Supervision and Administration
Paragraph 2 of Article 63 of the Regulations authorizes CSRC to establish a mechanism for cooperation in supervision and administration with futures regulatory authorities of other countries or regions to conduct cross-border supervision and administration, based on which relevant provisions are made in the Measures.
Translation provided by Min Li and Jia Fei of the Shanghai office of Katten Muchin Rosenman LLP.
 Third country laws and regulations governing the conduct of non-Chinese customers and brokers may also be relevant. For example, a non-US exchange may not permit a US customer or trader to access the exchange directly unless it is registered with the Commodity Futures Trading Commission as a foreign board of trade. See CFTC Rule 48.3.
 www.cfmmc.com (Chinese only)
 The relevant Chinese phrase, which also could be translated as "follow the principles of trading at one's own discretion," appears to emphasize that Overseas Traders may not be forced or induced by fraud to trade. It does not seem to prohibit validly authorized third-party trading.
 Katten Muchin Rosenman LLP provides this translation on a reasonable efforts basis only. No warranty or representation is made regarding the accuracy of the translation. Many phrases in Chinese do not have a precise translation into English. Rely on the Chinese language version for the authoritative text.
 The term "financial institution" does not appear to be defined, but would appear to include futures commission merchants registered with the Commodity Futures Trading Commission.
 The Interim Measures do not precisely describe the mechanics by which accounts would be set up at the futures exchanges. It appears that where an Overseas Broker places trades on behalf of Overseas Traders, the Overseas Broker places the trades on behalf of an omnibus account in its own name. Give-up arrangements are not described in the Interim Measures.
 This appears to be an account identifier.
 It is unclear whether the suitability assessment by Overseas Brokers should be by customer or by transaction. It is also unclear what would be expected in a suitability system for Overseas Traders.
 CFA prescribes standard risk disclosure statements for futures brokers.
 The Interim Measures do not address whether margining at futures exchanges is on a gross or net basis.
 Among the types of offenses covered by this provision are guaranteeing a customer against loss or failing to provide a required disclosure statement; offering to share profits or losses with a customer; trading for a customer without authorization; deceiving a customer; providing a customer a false statement of trading activities; misappropriating or mishandling customer funds; or engaging in other acts of fraud that may be prohibited by regulation.