ISDA derivatiViews: A Netting Milestone In China
Date
04/05/2021
For the past 35 years, ISDA has consistently advocated for the enforceability of close-out netting as an indispensable foundation for safe and efficient derivatives markets. Every country that recognizes netting in its domestic legislation represents a positive step forward, but the draft legislation that has been tabled in China is a seminal milestone.
On April 29, the Standing Committee of the National People’s Congress of China published a draft Futures Law for public consultation. Among its provisions, the draft bill appears to explicitly recognize netting enforceability in over-the-counter (OTC) derivatives, which would enable counterparties to close out transactions and calculate a net amount payable in the event of a default. It also expressly states that close-out netting cannot be invalidated or revoked because a party has entered bankruptcy proceedings.