Emerging markets

The Chinese derivatives market has never been black and white – more a murky shade of grey. Even with the publication of the China Banking Regulatory Commission's (CBRC) derivatives regulations in March 2004, bankers have often had to rely on legal interpretation and opinion. And it's not uncommon to find different law firms interpreting aspects of the rules slightly differently.

This is illustrated by the emergence of equity-linked structured deposits last year. Most lawyers and dealers were under the distinct impression that banks were not allowed to touch equity derivatives with a bargepole. The regulations issued in 2004 covered all derivatives, but clearly stated that institutions would have to abide by existing regulations on equities and commodities, which are overseen by the China Securities Regulatory Commission (CSRC). As the CSRC had not released any guidance