Financial Industry Standards of the People’s Republic of China JR/T 0100-2012 Elements of Futures Brokerage Contract Issued on January 31, 2013 Effective on January 31, 2013 China Securities Regulatory Commission Table of Contents Preface 1 Scope 2 Terms and Meanings 3 Disclosure of Futures Trading Risks 4 Important for Investors 5 Application for Account Opening 6 Obligations of Explanation and Notification before the Conclusion of Contract 7 Authorization 8 Margins and Their Management 9 Types and Issuance of Trading Orders 10 Execution of Trading Orders and Handling of Wrong Statements 11 Notification and Confirmation 12 Risk Control 13 Delivery and Hedging 14 Information, Training and Consultation 15 Costs 16 Effectiveness and Modification of Contract 17 Termination of Contract and Account Liquidation 18 Disclaimer 19 Settlement of Disputes 20 Miscellaneous Preface This Standard is drafted according to the rules in GB/T 1.1-2009. This Standard is proposed by the Securities Technical Sub-committee of the China Financial Standardization Technical Committee. This Standard shall be subject to the unified administration by the China Financial Standardization Technical Committee. This Standard is drafted by: the China Futures Association, the Department II of Futures Supervision of the China Securities Regulatory Commission (“CSRC”), GF Futures Co., Ltd, Guotai Junan Futures Co., Ltd, Huatai Great Wall Futures Co., Ltd, Galaxy Futures Co., Ltd, and Green Futures Co., Ltd. The main drafters of this Standard are: Liu Tiebin, Jiang Ping, Pan Hu, Liu Zhonghui, Lin Shuheng, Xiao Hui, Wan Xiaoying, Song Shanshan, Hu Weining, Zhang Junjun, Wang Wei, Li Jiang, Ma Wenjie, Sun Hui, Yun Yongheng, Wang Xi, etc. Elements of Futures Brokerage Contract 1 Scope This Standard specifies the essential elements of a futures brokerage contract to direct futures companies to develop futures brokerage contracts. This Standard shall apply to the Futures Brokerage Contracts entered into between futures companies and investors for participating in futures trading within the territory of the People’s Republic of China. 2 Terms and Meanings The following terms and meanings shall apply to this Standard. 2.1 Futures Market Means a premise for futures trading, which is derived from forward spot market, and is a market form with higher degree of systematization and standardization corresponding to the spot market. The futures market includes, in a broad sense, futures exchanges, futures companies, investors and other participants, and in a narrow sense, generally refers to futures exchanges, or other futures trading premises approved by the State Council or by the futures regulatory authority of the State Council. 2.2 Futures Exchange Means a not-for-profit legal person which is formed in accordance with the provisions of the Regulation on the Administration of Futures Trading and the Measures for the Administration of Futures Exchanges, performs the duties as prescribed in the Regulation on the Administration of Futures Trading and the Measures for the Administration of Futures Exchanges, and conducts self-disciplinary management under its bylaws and trading rules. 2.3 Futures Company Means a financial institution which is formed in accordance with the Company Law of the People’s Republic of China, the Regulation on the Administration of Futures Trading and the Measures for the Administration of Futures Companies and engages in futures business. 2.4 Investor Means an institution or individual that authorizes a futures company to engage in futures trading. 2.5 China Futures Margin Monitoring Center Co., Ltd Means a not-for-profit company with legal person status which is formed upon the approval of the State Council and the decision of the CSRC, and accepts the leadership, supervision and administration by the CSRC. Its main functions are to: establish and improve the futures margin monitoring and warning mechanisms, find problems affecting the security of futures margins and report them to regulatory authorities in a timely manner; provide clearing information inquiries and other services concerning futures trading for futures investors; keep under custody the guarantee funds of futures investors, and participate in the risk disposal of futures companies; be responsible for the construction of the futures market operation monitoring and control system, and undertake the monitoring, control, research and analysis of the operation of the futures market; undertake the unified account opening in the futures market; provide information services for regulatory authorities, exchanges and so on; and other functions as prescribed by the CSRC. 2.6 Introducing Broker Means a securities company which accepts the entrustment of a futures company to introduce clients to the futures company to participate in future trading, and provides other relevant services. 2.7 Futures Practitioners In accordance with the provisions of the Measures for the Administration of Futures Practitioners, futures practitioners include: managers and professionals of futures companies, managers and professionals engaging in futures settlement among the non-futures-company clearing personnel in futures exchanges, mangers and professionals engaging in futures investment consulting business in futures investment consulting institutions, mangers and professionals engaging in futures business in the institutions providing intermediary services for futures companies, and other persons as prescribed by the CSRC. 2.8 Futures Trading Means the trading activities with futures contracts or option contracts as the subject matter of trading which are conducted in the manner of centralized public trading manner or any other manner as approved by the CSRC. 2.9 Futures Margin Means the funds paid or the standard warehouse receipts, treasury bonds and other negotiable securities with stable values and high liquidity submitted by investors in accordance with the prescribed standards for settlement and performance guarantee purposes. 2.10 Futures Margin Account Means a special-purpose custody account opened by a futures company with a futures margin custodian bank for the deposit and management of margins of investors, including the special-purpose capital account opened by a futures company at the locality where the futures exchange is located for handling fund outflow and inflow in the futures business between it and the futures exchange. 2.11 Futures Settlement Account Means a bank account opened by an investor with a futures settlement bank for the deposit and withdrawal of funds in futures trading. 2.12 Futures Contract Means a standardized contract uniformly prepared by a futures exchange under which a certain quantity of the subject matter shall be delivered on a given future date at a specified location. Futures contracts include commodity futures contracts, financial futures contracts and other futures contracts. 2.13 Trading Order Means an order issued by an investor to a futures company, which generally includes trading variety, expiry month of the contract, opening and closing of positions, trading direction, quantity, trading price and so on. 2.14 Open a Position Means the activity by which an investor newly purchases or sells a certain quantity of futures contracts. 2.15 Close a Position Means the activity by which a futures investor purchases or sells a contract of the same variety, quantity and month of delivery as those of the contract it or he has held, but is opposite in the direction of trading, in order to close out futures trading. 2.16 Open Interest Means a futures contract which has not yet been closed after being opened by an investor. 2.17 Forced Liquidation Means a kind of compulsory measure of closing the positions held by members or investors in accordance with the relevant provisions, and its purpose is to control risks of futures trading. Force liquidation shall be divided into two circumstances: first, forced liquidation practiced by exchanges on the open interest of their members; and second, forced liquidation practiced by futures companies on the open interest of their investors. 2.18 Hedging Means a kind of trading mode of purchasing or selling, in futures market, futures contracts which have same or related variety, same or equivalent quantity, and same or similar month as those of the spot commodities or assets but are in opposite direction for the purpose of avoiding the risk of fluctuations in the spot price, so as to establish a profit and loss offset mechanism between the futures market and spot market to avoid the risk of price fluctuations. 2.19 Clearing Means the liquidation and transfer of funds conducted for the trading results of both trading parties at the settlement price published by a futures exchange. 2.20 Delivery Means the procedure by which, on the maturity of a contract, both trading parties, in accordance with the rules and procedures of the futures exchange, settle the contract having not yet been closed out on the maturity by transferring the ownership of the underlying goods stipulated in the contract, or by settling the difference in cash at a settlement price as prescribed. 2.21 Fee Means the fee paid by investors after the trading of a futures contract is reached and the delivery is completed. 3 Disclosure of Futures Trading Risks 3.1 It shall be specified that a futures company shall provide investors with a Disclosure Statement on Futures Trading Risks to warn investors that the losses incurred in futures trading may exceed all the margins they deposit in the futures company, and the investors shall read and confirm it. 3.2 The risks disclosed in the Disclosure Statement on Futures Trading Risks shall include but are not limited to: a) risks of forced liquidation due to insufficient margins or violation of trading rules; b) risks of price fluctuations due to extreme situations in market or changes in any policy, law, regulation or rules of the exchange; c) risks existing when futures trading is conducted through the information technology system; and d) risks of failure to conduct normal transactions due to any other reason beyond the control of futures exchange or futures companies. 3.3 A futures company shall warn investors of the risks of incompliance with the provisions of the CSRC on safe custody of futures margins. 3.4 A futures company shall explicitly indicate that the Disclosure Statement on Futures Trading Risks can not disclose all the risks of futures trading and all situations of the futures market. 4 Important for Investors 4.1 It shall be specified that a futures company shall provide investors with Important for Investors to inform the investors of the matters that they should be aware of in engaging in futures trading, and remind investors to read and confirm it. 4.2 Important for Investors shall include but are not limited to: a) necessary account opening conditions for investors; b) requirements for signing of account opening documents; and c) the matters which investors need to be aware of shall include but are not limited to: 1) futures trading risks; 2) a futures company may not guarantee profits; 3) a futures company may not accept investors’ carte blanche; 4) investors shall bear civil liability for the agency acts of their agents; 5) the website for the publicity of the qualifications of futures practitioners; 6) relevant provisions on safe custody of futures margins; 7) compliance with laws, regulations, trading rules of exchanges and relevant business provisions; 8) the website for the inquiry of futures margin accounts and settlement data of the futures company; 9) relevant provisions on introducing brokers; and 10) relevant laws and regulations on anti-money laundering. 5 Application for Account Opening 5.1 An investor who intends to open an account shall fill out an application for account opening. 5.2 The information elements of an application for account opening (by a natural person) shall mainly include: the identity information of the account holder, the identity information of the person issuing orders, the identity information of the person allocating funds, the identity information of the person confirming settlement statements, information on futures settlement account of the investor, and signature of the account holder. The elements of the identity information of an account holder shall mainly include: the investor’s name, sex, date of birth, nationality, occupation, address of residence or work unit, contact information, and the name, number and term of validity of his or her identity certificate. 5.3 The information elements of an application for account opening (by an institution) shall mainly include: identity information of the institution applying for account opening, the identity information of the account-opening agent, the identity information of the person issuing orders, the identity information of the person allocating funds, the identity information of the person confirming settlement statements, the information on futures settlement account of the investor, seal of the applicant, and the signature or seal of its legal representative (person in charge) or person authorized to handle the business. The elements of the identity information of an institution applying for account opening shall mainly include: its name, type, business scope, organization code, and the number of tax registration certificate; the name, number and term of validity of the license, certificate or document which can prove that the investor is legally formed or conducts business operations and social activities in accordance with law; the name of the controlling shareholder or actual controller, legal representative (person in charge) and person authorized to handle the business, and the name, number and term of validity of their identity certificates, and so on. 5.4 In case of any modifications of the identity information of an investor, the investor shall notify the futures company in a timely manner. 6 Obligations of Explanation and Notification before the Conclusion of Contract 6.1 A futures company shall specify that it has fulfilled the obligation of notification as prescribed in the Regulation on the Administration of Futures Trading, the Measures for the Administration of Futures Companies and other relevant provisions. 6.2 An investor shall declare that it or he has read and understood all the clauses of the contract including the Disclaimer, and meet the requirements of the Regulation on the Administration of Futures Trading, the Measures for the Administration of Futures Companies and other relevant provisions. 7 Authorization 7.1 It shall be specified that a futures company shall execute an investor’s trading orders under the rules of the futures exchange, and the investor shall undertake full responsibility for the trading results. 7.2 The definition of agents of investors, consequences of agents’ behaviors and assumption of responsibilities shall be specified. 7.3 The notification manner in the case of modification of the agent by an investor shall be specified. 8 Margins and Their Management 8.1 The manners for investors to inquiry about the margin account of a futures company shall be specified. 8.2 The manners and specific requirements for deposit and withdrawal of funds by investors shall be specified. 8.3 It shall be specified that an investor shall guarantee the legality of the sources of funds and shall, when necessary, provide relevant proof upon the requirements of the futures company. 8.4 The relevant provisions on the ownership, transfer, offset, and adjustment of margins of investors shall be specified. 8.5 The obligation of a futures company to keep confidential the relevant information on futures margin accounts of investors shall be specified, and investors shall declare that they permit the futures company to report their relevant information to the China Futures Margin Monitoring Center. 9 Types and Issuance of Trading Orders 9.1 The manners and operational requirements for investors to issue trading orders shall be specified. 9.2 The manner for checking trading orders shall be specified. 9.3 It shall be specified that investors shall properly keep their passwords and shall bear the responsibility for the theft and leaking of passwords. 10 Execution of Trading Orders and Handling of Wrong Statements 10.1 The specific contents of trading orders issued by investors, and the power of a futures company to examine and approve the trading orders as well as the examination contents shall be specified. 10.2 The specific operational requirements for the withdrawal and modification of trading orders by investors shall be specified. 10.3 The assumption of responsibilities for failure to conclude the trading orders issued by investors or for wrong execution of orders of investors by a futures company shall be specified. 11 Notification and Confirmation 11.1 The contents, time, manners, and methods of modification of notifications shall be specified. 11.2 The methods for investors to make inquiries through the inquiry system of the China Futures Margin Monitoring Center and the matters requiring attention shall be specified. 11.3 The manners and effectiveness of investors’ confirmation of the contents of notifications shall be specified. 11.4 The manners for handling investors’ objections to the contents of notifications shall be specified. 12 Risk Control 12.1 Investors shall, at any time, pay attention to their own open positions, margins, equity changes and so on, and properly handle them. 12.2 The manner and method for a futures company to calculate investors’ futures trading risks shall be specified. 12.3 The conditions for a futures company to take risk control measures such as forced liquidation, the handling manners and attribution of responsibility shall be specified. 12.4 A futures company shall inform investors of the information on forced liquidation. 13 Delivery and Hedging 13.1 The application time for physical delivery, delivery notification, settlement of delivery payments, physical delivery and handling methods for default in delivery shall be specified. 13.2 The matters of delivery of stock index futures and other financial futures shall be specified. 13.3 It shall be specified that investors who apply for hedging positions shall comply with the relevant provisions of the exchange. 14 Information, Training and Consultation 14.1The manners for a futures company to provide information services for investors, the contents thereof and attribution of responsibility shall be specified. 14.2 The manners for a futures company to provide training services for investors and the consultation rights of investors shall be specified. 14.3 Investors shall be explicitly informed of the channels for consulting the information published by a futures company. 15 Costs 15.1 The projects of commission fees that investors should bear shall be specified and the standards for charging commission fees shall be agreed upon. 15.2 It shall be specified that investors shall bear all kinds of fees and taxes paid by the futures company to futures exchanges and clearing institutions on their behalf. 16 Effectiveness and Modification of Contract 16.1 The conditions for and time of effectiveness of a contract shall be specified. 16.2 The conditions, manners and effectiveness time for modification of a contract shall be specified. 17 Termination of Contract and Account Liquidation 17.1 The right to rescind a contract, the exercise conditions and manner, and the attribution of responsibility shall be specified. 17.2 The handling of investors’ open positions and margins when a futures company cannot engage in futures business shall be specified. 17.3 The processes for termination of a contract shall be specified. 18 Disclaimer The scope of exemption of liability of a futures company and the limitations thereon shall be specified. 19 Settlement of Disputes The ways for settlement of disputes shall be specified. 20 Miscellaneous 20.1 The ways for handling the matters not covered in the contract shall be specified. 20.2 The constituent part and effectiveness of the contract shall be specified.