In order to safeguard the legitimate rights and interests of inter-bank market players (referred to as market players hereinafter) and promote well-regulated and sound development of China s financial derivatives market, the People s Bank of China (PBC) and the State Administration of Foreign Exchange (SAFE) approved that the National Association of Financial Market Institutional Investors (referred to as NAFMII hereinafter) promulgate the Master Agreement on the Trading of Financial Derivatives on the Inter-bank Market (referred to as the Master Agreement hereinafter), and made relevant announcements as follows:
1.When trading financial derivatives, market players shall sign the Master Agreement provided by NAFMII and report the signed Master Agreement and its supplementary agreements to NAFMII for record in a timely manner. NAFMII shall keep China Foreign Exchange Trade System and National Inter-bank Funding Center (referred to as China Forex Trade Centre hereinafter) informed of the signing.
Financial derivatives in this Announcement refer to financial derivative contracts accorded between two market players on a one-to-one basis whose terms are determined according to the specific requirements of both trading parties, including interest rate derivatives, exchange rate derivatives, bond derivatives, credit derivatives, gold derivatives and the portfolio composed of two or more the above-mentioned derivatives that meet the conditions specified hereinbefore.
2.The stipulation concerning single agreement scheme and close-out netting in the Master Agreement applies to financial derivative transactions.
3.The Master Agreement shall apply to the financial derivative transactions conducted after the signing of the Master Agreement; for transactions conducted before the signing of the Master Agreement, the previously signed master agreement or the Master Agreement is applicable upon mutual consent.
4.In order to ensure smooth transition from the old to the new version of the agreement, there is a transition period of six months after the issuance of the Master Agreement. Market players should conduct active negotiation during the transition period to sign the Master Agreement as soon as possible.
During the transition period, market players that have not signed the Master Agreement may continue to trade financial derivatives in accordance with the previous master agreement. After the transition period, market players that have not signed the Master Agreement will not be able to trade financial derivatives.
5.Provisions concerning the formulation, signing and filing of the master agreement on the trading of financial derivatives in the following documents shall be adjusted to conform the Master Agreement:
Administrative Regulations on Bond Forward Transactions on the National Inter-bank Bond Market (PBC Announcement No. 9 [2005]), Administrative Regulations on Forward Interest Rate Agreement Businesses (PBC Announcement No. 20 [2007]), Notice of the PBC on Relevant Issues Concerning the Interest Rate Swap Business (PBC Document No.
18 [2008]), Notice of the PBC on Relevant Issues Concerning Accelerating the Development of the Foreign Exchange Market (PBC Document No. 202 [2005]), SAFE s Reply to"the Master Agreement of RMB-Foreign Currency Derivatives on the National Inter-bank Foreign Exchange Market (2007)"Released by China ForEx Trading Centre (SAFE Reply No.
254 [2007]) and The Notice of the PBC on Relevant Issues Concerning RMB-Foreign Exchange Currency Swap Transactions on the Inter-bank Foreign Exchange Market (PBC Document No. 287 [2007]).
6.NAFMII shall release the full text of the Master Agreement in the form of an announcement to market players in due course, organize the market players to sign the Master Agreement and facilitate the filing of the Master Agreement and its supplementary agreements.
7.NAFMII should reinforce market discipline, organize training programmes on the Master Agreement, strengthen investor education, and guide market players to establish and improve internal control and risk management mechanisms of financial derivatives trading, so as to safeguard market order and protect the legitimate rights and interests of market players.
8.The Announcement shall come into force on the day of its release.
The People s Bank of China
March 11, 2009
