[Exclusive] ASEAN Exchange Organized Illegal Futures Transactions, Shall Compensate Investor, Court Rules
Cui Che
/SOURCE : Yicai
[Exclusive] ASEAN Exchange Organized Illegal Futures Transactions, Shall Compensate Investor, Court Rules

(Yicai Global) Dec. 11 -- The Shanghai No.1 Intermediate People's Court has made a final ruling on a spot goods investment dispute, determining that Nanning (China-ASEAN) Commodity Exchange Co. (ASEAN Exchange) has organized illegal futures trades and shall return all handling fees to an investor and bear joint and several liability for his losses.

The court maintained the judgment of the first instance and made the final ruling on Nov. 30, nullifying all 180 transactions made by an investor surnamed Chen with the ASEAN Exchange and demanding that the exchange return CNY316,000 (USD47,900) of handling fees to Chen and that Shanghai Jinchuang Investment Management Co. (Jinchuang Investment), a member of the exchange, return CNY8,351 in deferral fees to Chen and compensate him for 70 percent of his transaction losses.

Chen opened an account via Jinchuang Investment between January and March last year and conducted spot goods distribution transactions on 'ASEAN oil,' 'ASEAN asphalt' and 'ASEAN aluminum' on the ASEAN Exchange, incurring CNY940,000 of losses, of which CNY617,000 was investment losses and CNY320,000 was handling fees, per the second instance judgment.

Judging from whether the transaction objects are standardized contracts, whether transactions involve a margin trading model, whether they involve physical delivery and whether they are conducted via centralized trading, the spot goods distribution transactions at ASEAN Exchange meet the definition of illegal futures transactions as stipulated by the China Securities Regulatory Commission, the court said.

China's Supreme People's Court issued its opinions on further strengthening financial adjudication work in August, stating that courts shall nullify the legal effect of illegal and irregular transactions conducted by local exchanges without authorization or beyond their business scopes in strict accordance with laws and regulations and shall determine the civil liabilities of such exchanges to guard against regional financial risks.

Shanghai No.1 Intermediate People's Court did not order the exchange's member unit to compensate the investor for all his investment losses. The intermediate court held that as a person with full civil capacity, Chen should be aware of the nature and relevant risks of the transactions and should also be liable for his losses and that it is reasonable for the first instance court to determine that Chen himself shall bear 30 percent of his losses.

The intermediate court also determines that Jinchuang Investment shall compensate the investor for the remaining 70 percent of his losses. It also rules that as the premises where the transactions were conducted and the designer, publisher and self-regulator of the involved transaction products, ASEAN Exchange has violated the Administrative Rules for Futures Transactions, which prohibit exchanges from organizing illegal futures transactions, and shall bear joint and several liability for Chen's losses.

The People's Government of Nanning established ASEAN Exchange, a spot commodity electronic trading market, in Guangxi province in 2006. It is registered with the Ministry of Commerce.


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Keywords: Commodity Exchange , Nanning , Nanning(China-ASEAN) Commodity Exchange