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Part III Regulation of Financial Products, 8 Financial Derivatives

Douglas W Arner, Berry FC Hsu, Say H Goo, Syren Johnstone, Paul Lejot, Maurice Kwong-Sang Tse

From: Financial Markets in Hong Kong (2nd Edition)

Douglas W Arner, Berry Hsu, Say H Goo, Syren Johnstone, Paul Lejot, Maurice Kwok-Sang Tse (Consulting Editor)

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved.date: 01 December 2023

Credit risk — Debt — Futures — Securities — Investment business

This chapter examines the financial derivative instruments traded and used in Hong Kong. The chapter describes the current main types of financial derivatives, their uses and risks, and examines Hong Kong’s twofold approach to their regulation. It also raises questions that may not be fully addressed in any major financial jurisdiction; for example, how the law accounts for relatively new, sophisticated contracts, especially in relation to user protection; whether related areas of law such as bankruptcy may conflict with what has become customary derivative market practice; and how credit risk transfer facilitated by derivative instruments may conflict with established precepts of financial regulation. Lastly, it considers whether links between the territory’s regulators and the stock exchange are well-suited to the supervision of certain derivative activity and to investor protection.

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