BEIJING -- Chinese lawmakers are considering a draft law to tighten oversight of derivatives trading to guard against financial risks.

The draft law on futures and derivatives was submitted on Monday to the National People's Congress Standing Committee for a third reading.

The proposals outlined in the draft aim to facilitate stronger supervision over institutions, stipulating that financial institutions should obtain approvals, fulfill traders' duties of suitability management and observe relevant regulations when conducting derivatives trading.

It also clarifies rules on swap and forward contracts.

Overseas institutions should obtain approvals from futures regulatory authorities under the State Council before engaging in futures marketing, promotion and solicitation activities in China, says the draft.