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What Are the Infringements in Futures Trading and Related Responsibilities?
2010-11-24

 

Major infringements in futures trading and their responsibilities are as follows:

 

(1) Providing false information to mislead order placing. The disclosed information about policies and market conditions exerts a substantial even decisive impact on the investment decisions made by futures investors. Futures exchanges and futures companies should bear the economic losses caused to investors, if they intentionally provide false information to mislead investors into order placing.

 

(2) Hedging. Hedging refers to a practice in which a futures company matches an investor’s order with another investor’s or its own “order” in private, or conspires with a market participant to reach a deal in private instead of announcing the offer to all other market participants by way of open auction although it has transmitted the investor’s order to futures exchange. Hedging can be classified into three types, namely cross-trading, valuation adjustment and accommodation trade. Hedging conducted by futures companies in private should be deemed as invalid, and futures companies should compensate the economic losses caused to investors. In case that both futures companies and investors are guilty, they should respectively bear corresponding compensation responsibility according to seriousness.

 

(3) Using investors’ margins without permission. Embezzlement of investors’ margins by futures companies constitutes not only civil liability for infringement on investors’ property but also liability for breach of contract due to the brokerage legal relations between futures companies and investors under which futures companies bear the responsibility of keeping investors’ margins with due care. Embezzlement of margins constitutes a competing civil liability between breach of contract and infringement.

 

(4) Unauthorized trading in the name of investors by futures companies. Specifically, it includes unauthorized trading in the name of investors despite the fact that investors didn’t place orders, execution of trading orders placed by non-trustees, execution of defective orders such as those not indicating variety, quantity and trading direction, and inaccurate execution of trading orders placed by investors. The issue of competing liability between breach of contract and infringement also exists in these cases. Futures companies should bear compensation liability for the losses resulting from unauthorized trading in the name of investors.