‘Rat trading’ volume hits 80 billion yuan in China
CSRC investigations have led to criminal convictions of 25 fund managers, while another 15 have been barred from the market
China’s finance regulators have uncovered 80 billion yuan (US$11.7 billion) worth of trade volume related to a common form of misconduct known as “rat trading” since 2014, as the country has strengthened supervision of fund managers operating in its US$7 trillion stock market.
The figure is equivalent to roughly 3 per cent of Hong Kong’s economic output last year.
Rat trading in China essentially refers to a form of misconduct in which traders at a financial institution build a position with their own money, and then use investors’ funds to elevate the share price. It is more commonly referred to in western markets as front-running.
Beijing has made a huge push to clean up the country’s financial market since a stock rout in the summer of 2015 wiped out US$5 trillion of market value in a few trading days.
By the end of May, the China Securities Regulatory Commission (CSRC) had carried out investigations into 99 cases of rat trading since 2014, while the related trade volume reached 80 billion yuan, a spokesperson for the regulator said on Friday at a press conference in Beijing.
The investigation has so far resulted in the criminal convictions of 25 fund managers, while another 15 have been barred from the market by the CSRC, the spokesperson said.
The Ministry of Public Security issued a statement on Friday afternoon, saying “rat trading has been taking place at a higher rate across the country in recent years”.
