Futures in China
Provisions of Supreme People’s Court for Several Issues Concerning Trying Cases 2014-06-23
Updated: September 17, 2007
(Passed by the 1270th session of the Trial Committee of Supreme People’s Court on May 16, 2003)
Fa Shi [2003] No. 10
These Provisions are formulated in respect of the several issues concerning trying cases of futures disputes pursuant to the provisions of the General Civil Rules of the People’s Republic of China, the Contracts Act of the People’s Republic of China, the Civil Procedural Act of the People’s Republic of China and other applicable laws and administrative regulations and integrated with the trial practice experience for the purpose of correctly trying cases of futures disputes.
I. General Provisions
Article 1 The people’s court trying a futures dispute case shall legally protect the lawful rights and interests of the parties, correctly determine the risks and liabilities which the parties shall assume, and maintain the order of the futures market.
Article 2 The people’s court trying a case of a futures contract dispute shall determine the defaulting party’s liability subject strictly to the agreement the parties thereto made therein except for the portions against the law or the mandatory provisions of the administrative regulations.
Article 3 The people’s court trying the cases of the futures infringement and the invalid futures trading contract shall determine the wrongdoer’s civil liabilities on the bases of whether each party commits wrongs, of the natures and extents of the wrongs and of the causal relationship between the wrongs and the losses.
II. Jurisdiction
Article 4 The people’s court shall determine the jurisdiction over a futures dispute case subject to the provisions of Articles 24, 25 and 29 of the Civil Procedural Act.
Article 5 The domicile of a branch or affiliate shall be the place of the contract performance if the futures trading is carried out at the future company’s branch, sales office or any other affiliate.
The domicile of the futures trading shall be the place of the contract performance in case there occurs a dispute in respect of the physical delivery.
Article 6 The jurisdiction over a futures dispute case of concurrence of tort and breach of contract shall be determined on the basis of the cause of action chosen by the party thereto, or of the first claim in the complaint if the party thereto institutes a lawsuit based on tort and breach of contract.
Article 7 A futures dispute case shall be under the jurisdiction of the intermediate people’s court.
The higher people’s court may determine, if necessary, portions of the primary people’s courts to accept the futures dispute cases.
III. Subjects of Assuming Liabilities
Article 8 The civil liabilities arising out of the engagement in the futures trading by a futures company’s practitioner within the business scope of the futures company shall be assumed by such futures company.
Article 9 The civil liabilities arising out of the engagement in the futures trading by a non-futures company’s employee who is authorized by such futures company to do so in its name shall be assumed by such futures company. The civil liabilities arising out of the engagement in the futures trading by a non-futures company’s employee in the name of the futures company shall be assumed by such futures company provided that the conditions for apparent agency under Article 49 of the Contracts Act are satisfied.
Article 10 If a citizen or a fictitious person is commissioned by a futures company or a client to be its go-between to provide it the opportunities of executing a contract or the intermediary services for executing a brokerage contract, the futures company or the client, as the case may be, shall pay to the go-between the agreed remuneration. The go-between shall independently assume the civil liabilities arising out of the go-between or brokerage relationship.
Article 11 A unit or individual that engages in futures trading with a false identity shall solely assume the trading results provided that its or his trading satisfy the futures exchange’s trading rules.
Article 12 The civil liabilities arising out of the carrying out business activities out of the business scope by a branch, sales office or any other affiliate that is established by a futures company and has obtained the business license and the operation license shall be assumed by the futures company provided that they cannot be assumed by such affiliate.
A client who commits a wrong shall assume appropriate civil liabilities.
IV. Liabilities for Invalid Contract
Article 13 A futures brokerage contract shall be held to be invalid in case of any of the following circumstances:
(1) Engaging in futures brokerage business without the qualification thereof;
(2) Engaging in futures trading without the qualification thereof; or
(3) Violating the prohibitive regulations of the law or the regulations.
Article 14 In case an invalid futures contract results in a client’s economic loss, the liability thereof shall be determined on the basis of the causal relationship between the invalidness and the loss. If one party’s loss arises out of the other party’s action or omission, the other party shall indemnify the loss; or if both parties have commit wrongs, they shall assume the civil liabilities on the basis of the extents of their wrongs.
Article 15 In case a futures brokerage contract is invalid due to the engagement in futures brokerage business by a unqualified operation agency and the agency trades in market as instructed by the client, the commission collected shall be refunded to the client and the trading result shall be assumed by the client.
In case the agency does not trade in market as instructed by the client and the client commits no wrong, the agency shall refund to the client the margin and indemnify the client’s loss including the trading charges, taxes and interest.
V. Liabilities for Trading
Article 16 A futures company shall appropriately indemnity the client’s loss arising out of the trading subject to Item (3) of Article 42 of the Contracts Act in case it fails to remind the client to note the content of the Futures Trading Risk Statement to be signed or sealed by the client upon conclusion of a futures brokerage contract; provided, however, that the futures company’s liabilities shall be excused if it proves that the client has trading experiences as evidenced by the past trading results.
Article 17 A futures company which accepts the client’s full authority to carrying out futures trading shall be mainly liable for indemnifying the loss arising out of the trading and the indemnification amount shall not exceed eighty percent of the loss, unless otherwise provided by the law or administrative regulations.
Article 18 A futures company which fails to prove its carrying out the trading is based on the client’s trading instruction under the circumstance that the futures brokerage contract between the futures company and the client provides no or indefinite methods of issuing a trading instruction shall indemnify the client’s loss arising out of the trading unless the trading is subsequently confirmed by the client.
 
Article 19 A futures company which executes the non-mandatary’s trading instruction and results in the client’s loss shall indemnify such loss, and the non-mandatary shall be jointly and severally liable for such loss, unless such trading is subsequently confirmed by the client.
Article 20 A futures company which carries out trading without refusing the client’s trading instruction without a variety, quantity or direction of sales or purchase shall indemnify the client’s loss, unless such trading is subsequently confirmed by the client.
Article 21 A client’s trading instruction with definite quantity and direction of sales or purchase but without an effective term shall be deemed to be effective on the current date, at the market price in case of no execution price, as opening for trading in case of no direction of opening or liquidation.
Article 22 The trading results arising out of a futures company’s error in executing the client’s trading instruction shall be assumed by the futures company unless confirmed by the client, and shall be handled as below:
(1) In case of an error in trading quantity, the portions more than the instructed quantities shall be assumed by the futures company; and the portions less than instructed quantities shall be supplied by the futures company or shall obligate the futures company to indemnify the direct loss; and
(2) In case of the trading price exceeding the client’s instructed price range, the trading price difference loss or the trading results shall be assumed by the futures company.
Article 23 A futures company which executes the client’s instruction with improper delay and results in the client’s loss shall indemnify the loss; however, the futures company assumes no liability if, in respect of the client’s instruction, there is no or partial execution due to the market reason.
Article 24 The people’s court shall support the client’s claim that the futures company refund the price difference interests arising out of the futures company’s sales at a price higher than that instructed by the client or purchase at a price lower than that instructed by the client against the client’s instructed price range, unless otherwise agreed between the futures company and the client.
Article 25 The futures exchange shall indemnify the futures company’s loss arising out of the futures exchange’s failure to notify to the futures company the calculation results of the trading or the positions as per the periods and methods described in the trading rules.
The futures company shall indemnify the client’s loss arising out of the futures company’s failure to notify to the client the calculation results of the trading or the positions as per the periods and methods described in the futures brokerage contract.
Article 26 A futures company which fails to produce evidences proving its issuance of the notification above under the circumstance that there is no or indefinite agreement in respect of the methods of notifying the trading settlement results between the futures company and the client shall mainly liable for indemnifying the expanded loss arising out of the clients’ continuing position and the indemnification amount shall not exceed eighty percent of the loss.
Article 27 The client’s confirmation of the settlement results of the daily trading shall be deemed the confirmation of any and all settlement results of the positions and trading prior to that date, and the trading results arising out thereof shall be solely assumed by the client.
Article 28 The futures exchange shall indemnify the futures company’s expanded loss arising out of the futures exchange’s failure to timely taking measures when the futures company objects to the settlement results of the trading.
Article 29 The futures company shall indemnify the client’s expanded loss arising out of the futures company’s failure to timely taking measures when the client objects to the settlement results of the trading.
Article 29 In case the futures company (or the client) objects to the futures exchange’s (or the futures company’s) trading settlement results but fails to files an objection thereto within the period described in the futures exchange’s trading rules (or agreed in the futures brokerage contract), it shall be deemed that the futures company (or the client) has confirmed the trading settlement results.
Article 30 A client shall not be liable for the mixed-code trading carried out by the futures company; however, the client shall be appropriately liable for the trading results if the futures company is capable of proving it has traded in marked as instructed by the client.
VI. Liabilities for Overdue Trading
Article 31 It shall be deemed to be the overdue trading that a futures exchange permits a futures company’s opening for trading or continuing position under the circumstance that the futures company has no or insufficient margin.
It shall be deemed to be the overdue trading that a futures company permits a client’s opening for trading or continuing position under the circumstance that the client has no or insufficient margin.
The examination whether a futures company or client is carrying out the overdue trading shall be subject to the margin percentages provided for by the futures exchange.
Article 32 The futures exchange shall be mainly liable for indemnifying the futures company’s expanded loss arising out of the quotations changing to the direction against the positions under the circumstance that the futures exchange fails to notify the futures company to re-deposit margin in case of insufficiency in the futures company’s trading margin, and the indemnification amount shall not exceed sixty percent of the loss.
The futures company shall be mainly liable for indemnifying the client’s expanded loss arising out of the quotations changing to the direction against the positions under the circumstance that the futures company fails to notify the client to re-deposit margin in case of insufficiency in the client’s trading margin, and the indemnification amount shall not exceed eighty percent of the loss.
Article 33 In case the futures exchange performs the notification obligation in case of insufficiency in the futures company’s trading margin but the futures company fails to timely re-deposit margin, and if the futures company requires reserving position and a written consensus has been made in respect thereof, the futures company shall be liable for the loss arising out of the period of reserving position; and the futures exchange shall be liable for the loss arising out of a critical position.
In case the futures company performs the notification obligation in case of insufficiency in the client’s trading margin but the client fails to timely re-deposit margin, and if the client requires reserving position and a written consensus has been made in respect thereof, the client shall be liable for the loss arising out of the period of reserving position; and the futures company shall be liable for the loss arising out of a critical position.
Article 34 A futures exchange which permits the futures company’s opening for trading shall be mainly liable for indemnifying the loss arising out of the overdue trading, and the indemnification amount shall not exceed sixty percent of the loss.
A futures company which permits the client’s opening for trading shall be mainly liable for indemnifying the loss arising out of the overdue trading, and the indemnification amount shall not exceed eighty percent of the loss.
Article 35 A futures exchange shall be appropriately liable for indemnifying the loss arising out of the overdue trading under the circumstance the futures exchange permits the futures company’s overdue trading and has made a risk- and benefit-sharing agreement with the futures company.
A futures company shall be appropriately liable for indemnifying the loss arising out of the overdue trading under the circumstance the futures company permits the client’s overdue trading and has made a risk- and benefit-sharing agreement with the client.
VII. Liabilities for Forced Liquidation
Article 7 The provisions of the trading rules shall be applicable under the circumstance that the futures company has insufficient trading margin and fails to re-deposit margin within the period provided for by the futures exchange; and in case the provisions thereof is indefinite, the futures exchange shall have the right to carry out forced liquidation against the futures company’s futures contracts not liquidated, and the loss arising out of forced liquidation shall be assumed by the futures company.
The provisions of the futures brokerage contract shall be applicable under the circumstance that the client has insufficient trading margin and fails to re-deposit margin within the period described in the futures brokerage contract; and in case the provisions thereof is indefinite, the futures company shall have the right to carry out forced liquidation against the client’s futures contracts not liquidated, and the loss arising out of forced liquidation shall be assumed by the client.
Article 37 In case a futures exchange must carry out forced liquidation due to the futures company’s irregularity position or other irregularities, the loss arising out of forced liquidation shall be assumed by the futures company.
In case a futures company must carry out forced liquidation due to the client’s irregularity position or other irregularities, the loss arising out of forced liquidation shall be assumed by the client.
Article 38 The futures company (or the client) shall be solely liable for the expanded loss arising out of its non-liquidation under the circumstance that the futures company (or the client) should liquidate by itself after satisfaction of the conditions for forced liquidation in case of its insufficiency in trading margin, unless otherwise provided by the law or administrative regulations (or agreed between the parties).
Article 39 The amount of forced liquidation to be carried out by the futures exchange (or the futures company) shall be substantially equal to that of the margin which should be re-deposited by the futures company (or the client). Any loss arising out of over-limit liquidation shall be assumed by the one that has carried out the forced liquidation.
Article 40 The futures exchange (or the futures company) shall be liable for indemnifying the futures company’s (or the client’s) loss arising out of its failure to carry out forced liquidation against the futures company (or the client) as per the conditions for, time and methods of, forced liquidation provided for by the futures exchange’s trading rules (or described in the futures brokerage contract).
Article 41 The futures exchange’s expenses in connection with its forced liquidation subject to law or the trading rules shall be assumed by the futures company against which the forced liquidation is carried out; and such futures company shall have the right to recover such expenses against the client which has a wrong in connection therewith.
The futures company’s expenses in connection with its forced liquidation subject to law or the contract shall be assumed by the client.
VIII. Liabilities for Physical Delivery
Article 42 The designated warehouse shall be liable for indemnifying the warehouse warrant holder’s loss arising out of its failure to perform its duties of inspecting the goods or out of its improper custody.
Article 43 The futures company which fails to perform on the client’s behalf the obligation of applying for delivery shall be liable for default and for indemnifying the client’s loss, if any.
Article 44 It shall constitute a delivery default that on the delivery day, the seller’s futures company fails to delivers the standard warehouse warrant to the futures company or the buyer’s futures company fails to delivers the sufficient payment of the goods at the futures exchange’s account.
In case of a delivery default, the defaulting party shall be liable for default; and in case of a circumstance under Item (iv) of Article 94 of the Contacts Act, the other party may require termination of delivery or require the defaulting party’s continuing performance of delivery.
In case of failure in public sales or purchase, the defaulting party shall be liable for indemnification subject to the exchange’s applicable indemnification rules.
Article 45 In case the purchaser’s (or the seller’s) client defaults during the delivery period of a futures contract, the futures exchange (or the futures company) shall be liable for default to the other party on behalf of the futures company (or the client).
Article 46 It shall be deemed that the buyer’s client has no objection to the quantity and quality of the goods in case it files no objection to the quality and quantity thereof within the period provided by the futures exchange’s trading rules.
Article 47 The delivery warehouse shall be liable for the standard warehouse warrant holder’s loss in case it fails to delivers, within the period provided by the futures exchange’s trading rules, the goods satisfying the requirements of the futures contract, and the futures exchange shall be jointly and severally liable therefor.
The futures exchange shall have the right to claim against the delivery warehouse after its performance of the liability.
IX. Liabilities for Guaranteeing Contract Performance
Article 48 The futures exchange shall be liable for indemnifying the trading counterparty’s loss arising out of its failure to perform the obligation of appropriate monetary payment on the behalf of the futures company which fails to do so as required by the daily zero debt settlement policy.
The futures exchange shall have the right to claim against the party which fails to perform its obligation after the futures exchange’s performance of the obligation on the futures company’s behalf or assumption of the indemnification liability.
Article 49 In case the futures exchange fails to perform the futures contract on the futures company’s behalf, the futures company shall claim against the futures company as per the client’s claim. In case the futures company refuses to claim against the futures exchange on the client’s behalf, the client may directly institute a lawsuit against the futures exchange, and the futures company may participate in the lawsuit as a third party.
Article 50 The futures exchange shall be liable for indemnifying the futures company’s or the client’s direct economic loss arising out of the futures exchange’s error in information release or processing of trading instructions due to its wrongs, except for a force majeure event evidenced by the futures exchange.
Article 51 The futures exchange shall not be liable for indemnifying the client’s loss arising out of its taking reasonable emergent measures against any abnormal event in the futures market pursuant to the applicable provisions.
The futures company shall not be liable for indemnifying the client’s loss arising out of its implementing the futures exchange’s emergent measures.
X. Liabilities for Tort
Article 52 The futures exchange (or the futures company) shall be liable for the client’s economic loss arising out of the client’s placing an order misled by the futures exchange’s (or the futures company’s) intentional provision of false information.
Article 53 The futures company’s private hedging, valuation adjustment with the client, or any other failure to put have client’s instructions traded in market shall be held invalid, and the futures company shall indemnify the client’s economic loss in connection therewith; and in case both the futures company and the client commit wrongs, they shall assume the indemnification liability on the basis of the extents of their wrongs.
Article 54 The futures company shall be liable for the loss arising out of the client’s not subsequently confirming the trading results from the futures company’s trading in the client’s name but without the client’s permit.
Article 55 The futures company shall be liable for indemnifying the client’s loss arising out of its appropriating the client’s margin or transferring or deducting the client’s margin against the applicable provisions.
XI. Liabilities for Burden of Proof
Article 56 The futures company shall be liable for burden of proof in respect of whether trading in market has been made as per the client’s trading instructions.
The confirmation of whether the futures company has carried out trading in market as per the client’s trading instructions shall be subject to the consistence between the futures exchange’s trading records and the trading settlement results notified by the futures company with the variety and the direction of sales or purchase, and to the consistence in price and trading time, with the instruction trading number as reference; unless otherwise evidenced by the client that no trading in market is carried out as per its trading instructions
Article 57 The futures exchange shall be liable for burden of proof in case the futures company denies receipt of the notification above to effect that the futures exchange notifies the futures company to re-deposit margin.
The futures company shall be liable for burden of proof in case the client denies receipt of the notification above to effect that the futures company notifies the client to re-deposit margin.
XII. Attachment and Enforcement
Article 58 The people’s court which attaches the membership charges appropriate to the membership or the trading seat shall legally rule no transfer of the membership and no discontinuation of the use of the member’s trading seat. The people’s court shall have the right to take enforcement measures to transfer the trading seat during the course of enforcement.
Article 59 In case the futures exchange (or the futures company) is the debtor, the people’s court shall not freeze, or transfer or deduct the futures company’s (or the client’s) funds in the futures exchange’s (or the futures company’s) margin account.
In case the margin account has portions exceeding the futures company’s (or the client’s) equity capital as proved by evidences but the futures exchange (or the futures company) fails to produce contrary evidences within the reasonable period designated by the people’s court, the people’s court may legally freeze, or transfer or deduct the funds therein belonging to the futures exchange (or the futures company).
Article 60 In case the futures company is the debtor, the people’s court shall not freeze, or transfer or deduct the minimum settlement reserve funds that are not occupied by the futures contract and used for securing performance of the futures contract; and in case the futures company has settled any and all positions and paid off the client’s funds, the people’s court may legally freeze, or transfer or deduct the settlement reserve funds.
In case the futures company as other assets, the people’s court shall first legally freeze, attach and enforce the futures company’s such other assets.
Article 61 In case the client or the self-operating member is the debtor, the people’s court may legally take attachment and enforcement measures against its margin and positions.
XIII. Miscellaneous
Article 62 A futures company herein shall refer to an operation agency which is legally approved to engage in the futures trading business on the investor’s behalf and its branch, sales office and any other affiliate. A client herein shall refer to an investor that commissions an futures company to engage in the futures trading.
Article 63 These Provisions shall enter into force as of 1 July 2003.
Any futures trading or tort that occurred prior to 1 July 2003 shall be governed by the then-currently applicable regulations, or in case such provisions are indefinite, by reference to these Provisions.