securities regulator has fined three of the country’s largest investment
banks for facilitating bearish bets on the stock market by a unit of
US-based Citadel Securities during the Chinese market rout of late 2015.
Citic Securities, China’s largest brokerage by revenue, was fined
Rmb308m ($45m) and required to forfeit an additional Rmb62m in profits
earned from securities lending and margin financing for a Shanghai
account operated by Citadel Securities, a market-making arm separate
from the fund founded by Ken Griffin , according to an exchange filing.
Two executives were also fined.
In summer 2015, as China’s stock market was falling sharply after a
strong run the previous year, regulators targeted “malicious short
sellers” whose trading practices they believed crossed the line into
A particular focus of the crackdown was high-frequency traders, who the
regulator claimed were responsible for amplifying market swings. In
July, the regulator shut down 24 automated trading accounts, including
one operated by Citadel Securities in Shanghai. Citadel Securities is
separate from Mr Griffin’s main hedge fund unit, called simply Citadel.
Both are considered pioneers in algorithmic trading.
The China Securities Regulatory Commission said it was concerned about a
practice known as “spoofing”, in which an investor submits a buy or sell
order but withdraws it before a trade is completed. The technique can be
used to create the false impression an asset is trading at a particular
price. The regulator has not accused Citadel Securities of wrongdoing.
The company said at the time it followed all local laws and regulations
and did not engage in spoofing.
For Citic, which is controlled by Citic Group — China’s largest
state-owned financial and industrial conglomerate — the fines add to the
fallout from the 2015 market rout. In late 2015, at least 11 of the
brokerage’s senior executives and board members were arrested for
insider trading and leaking insider information, including its president
At least four later admitted to insider trading, according to the
official Xinhua news agency. Citic Securities’ chairman Wang Dongming
was forced to resign after failing to prevent employees’ alleged
wrongdoing, according to people familiar with the situation.
Guosen Securities, the country’s eighth-largest brokerage, and its
futures unit were fined Rmb105m. Haitong Securities was punished for
making a false disclosure when it opened a margin trading account for
Citadel Securities. The disclosure allowed Haitong to lend cash and
securities to Citadel even though the six-month requirement had not been