The China Financial Futures Exchange ("CFFEX") has recently released the Administrative Measures for Risk Reserves (the "Measures") which have taken effect from May 24, 2019.
The Measures set forth clear requirements in respect of withholding, deposit and management, use, and examination and approval, of risk reserves, laying a solid institutional foundation for future work on risk reserve management. The Measures provide that risk reserves are the funds legally established by the CFFEX and to be used for sustaining the normal functioning of the financial futures market, providing financial guarantee and making up for losses caused by unforeseeable risks the CFFEX is exposed to, adding that the CFFEX shall withhold and set aside risk reserves at 20% of its income of service fees. Meanwhile, the Measures expressly state that the CFFEX shall transfer on time the risk reserves it has set aside into the special account for risk reserves. Risk reserves shall be managed under separate accounting, deposited in the special account and used solely for making up for losses caused by risks rather than for any other purposes.