UNITED STATES 

COMMODITY FUTIJRES 

TRADING COMMISSION 

MEMORANDUM 

OF 

UNDERSTANDING 

BETWEEN THE 

AND CHINA 

SECURITIES 

REGULATORY 

C011MISSION 

REGARDING FUTURES REGULATORY COOPERATION 
1. The United States Commodity Futures Trading Commission (CFfC) was created by the 

United States Congress as an independent agency with the mandate to regulate commodity 

futures and options markets in the United States. 

2. The China Securities Regulatory Commission (CSRC) has been established with the approval · 

of the State Council of the People's Republic of China as the authority in charge of supervising 

and regulating the national securities and· futures markets in China. 

3. The CFfC and the CSRC (collectively the Authorities), are jointly committed to maintaining 

. open, fair, efficient and sowtd futures and options markets; recognize that the development of 

domestic legal and regulatory stnictur~ is essential to market integrity and investor protection; 

believe that international cooperation can facilitate the development and effective operation of 

futures and options markets; and desire to establish a mutually acceptable basis for cooperation, 

consultation and the provision of technical assistance. The CFTC and the CSRC have reached 

the following understanding with respect to cooperation, consultation, and the provision of 

technical assistance. · 

CLAUSE I CONSULTATION REGARDING MATTERS OF MUTUAL INTEREST 

Section 1. General Principles 

1. This Memorandum of Understanding (MOU) describes the intent of the 

Authorities and does not create legally binding obligations or supersede domestic law of either 

country. 

2. The Authorities recognize the need and desirability of providing assistance, as set 

forth in Clauses II and III, to each other pursuant to this MOU. The provision of any such 

assistance should be consistent with the domestic laws of the Authorities and the availability of 

resources. Where the provision of assistance would be contrary to the public interest of an 

Authority, such assistance may be denied. 

3. The Authorities intend to engage in a dialogue on all aspects of futures and 

options regulation and on the development and operation of their futures and options markets. 
Section 2. Consultation 

The Authorities intend to consult periodically about matters of mutual interest in order to 

~ promote cooperation and market integrity, and to further the protection of futures and options 

market participants. Such consultation may cover, among other things, the development of 

prudential standards and conduct ofbusiness standards for the operation of futures businesses 

(brokers, dealers and markets), the evolution of clearance and settlement and other market 

systems, the execution of market oversight, and the administration of the Authorities' futures and 

options laws, rules, and regulations. The purpose of such consultation is to assist in the 

development of effective approaches to strengthening domestic and international futures and 

options markets. 

Section 3. Information Sharing 

The Authorities intend to share information on each other's laws, rules and regulations 

pertaining to futures and options markets and how those laws, rules and regulations are 

implemented and interpreted. 

CLAUSE IT PROVISION OF TECHNICAL.ASSISTANCE FOR THE DEVELOPMENT OF 

THE CHINA SECURITIES REGULATORY COMMISSION 

' 

Section 1. · Technical Assistance 

The CFfC intends to consult with and provide advice to the CSRC for the development, 

administration, and operation of the futures and options markets in the People's Republic of 

China. Such consultation should identify specific types of technical assistance the Authorities 

believe are desirable and reasonable. The technical assistance may include the training of 

personnel as well as the provision of information and advice relating to the development of: 

a. Systems to improve the risk management, price discovery and hedging 

functions of markets; 

b. Futures and options products and the basics of designing contracts not 

readily susceptible to manipulation; 

c. Order handling systems; 

d. Trade recording and comparison systems; 

e. Quotation and transaction data transmission systems; 

f. Clearance and settlement mechanisms; 

2 
g. 

h. 

I. 

J. 

k. 

Section 2. 

Regulatory requirements and best practices relating to market 

professionals, products and markets; 

Systems and related regulatory mechanisms relating to financial 

survei Hance; 

Systems for effective market surveillance and enforcement programs; 

Disclosure and 9ther procedures and practices to protect futures and 

options customers and market participants; and 

Information with optimal levels_ of transparency. 

Specific Technical Assistance 

Specific technical assistance may be provided in the following manner: 

a. 

b. 

c. 

d. 

Comment by CFfC staff on draft laws and regulations; 

Availability of CFfC staff and other relevant experts to provide 

consultation regarding futures and options markets; 

General training sessions concerning futures and options regulation; and 

Internship programs of short duration for CSRC personnel at the CFTC, 

conditioned upon entering into any necessary confidentiality agreements. 

Section 3. Availability 

The Authorities recognize that sp_ecific technical assistance is subject to the availability of 

resources and domestic authorizing legislation. 

CLAUSE III COOPERATION 

Each Authority may, subject to Clause IV, Section 2, give assistance as to: 

a. The granting of licenses for the conduct of futures business; 

b. The observance of the laws and regulations applicable to futures business; 

c. The observance of the laws and regulations applicable to futures 

exchanges and other types of markets; 

3 

} 

/ 
d. 

e. 

CLAUSE IV 

Section 1. 

The observance of the regulations of futures exchanges by their members 

or other market participants; and 

The prevention and detection of futures and options fraud and other 

irregularities in connection with the offer, purchase or sale of any futures 

or options contract. 

OPERATIONS 

Laws, Rules and Requirements 

The Authorities have exchanged general information on the laws, rules and requirements 

applicable to the confidentiality and use of information. 

Section 2. Requests 

Requests for assistance under Clause ill, procedures for making and executing such 

requests, permissible uses of information, confidentiality requirements and other matters not 

explicitly included in this MOU should be addressed on a case-by-case basis. 

Section 3. Official Contacts 

To further ensrire the effective operation of this MOU, and to facilitate communication 

between the Authorities, the Authorities hereby designate the contact officials set forth in 

Attachment A. 

CLAUSEV FUTURE UNDERSTANDINGS 

I. The Authorities plan to regularly review their efforts pursuant to this MOU with a 

view toward imp.roving communication between them. In this regard, when new United States 

and/or People's Republic of China futures and options laws take effect, the Authorities intend to 

consider whether this MOU should be supplemented or superseded. 

2. The Authorities intend to move toward more fonnal information sharing 

arrangements after they have some experience with the operation of this MOU. 

4 
CLAUSE VI EFFECTIVE DATE AND TERMINATION 

Section 1. Effective Date 

This MOU will be effective from the date of its signature by the CFTC and the CSRC. 

Section 2. Termination 

This MOU may be terminated at any time by either Authority giving thirty days' written· 

notice to the other Authority. Termination of this MOU will not affect requests for assistance 

that are made prior to the effective date of such notification. 

This MOU is executed in duplicate in English and Chinese in Washington, DC 

on January 18,2002. 

FOR THE 

UNITED STATES COMMODITY 

FUTURES TRADING COMMISSION 

5 

FOR THE 

CHINA SECURITIES 

REG ATOR CO:MM:ISSION 

AN 
ATTACHMENT A 

The United States Commodity Futures Trading Commission designates as its contact official: 

Director 

Office of International Affairs 

Commodity Futures Trading Commission 

3 Lafayette Centre 

1155 21st Street, NW 

Washington, DC 20581-0001 

USA 

Tel: 202 418 5645 

Fax: 202 418 5548 

The China Securities Regulatory Commission designates as its contact official: 

· "">irector -General 

...)epartment of International Cooperation 

Jin Yang Plaza 

16 Jin Rong Street 

Xi Cheng District 

Beijing 1 0003 2 

The People's Republic of China 

Tel: 

Fax: 

8610 662 10205 

8610 662 10206 

6