China fines traders in first Shanghai-HK stock fixing case

They made illicit profits from spoofing and manipulating prices through HK accounts

BEIJING • Chinese regulators handed down penalties of more than US$173 million (S$244 million) to a group of traders in the country's first market manipulation case involving the stock exchange connect programme between Shanghai and Hong Kong.

Mr Tang Hanbo and Mr Wang Tao made 41.9 million yuan (S$8.5 million) in illicit profits by manipulating shares of Zhejiang China Commodities City Group through trading accounts in the two cities, according to the China Securities Regulatory Commission (CSRC), in a statement published last Friday.

Mr Tang and others also made 250 million yuan manipulating other stocks in mainland China, the commission said.

The combined penalties amounted to 1.2 billion yuan, it said. Both men, who could not be reached for comment, have the right to appeal.

The CSRC said Mr Tang and Mr Wang allegedly engaged in practices that included spoofing, manipulating opening and closing prices, and self-trading. From Feb 4 to April 26, 2016, their trading accounted for more than 10 per cent of the stock's daily volume.

  • $8.5m

  • What traders Tang Hanbo and Wang Tao made by manipulating shares of Zhejiang China Commodities City Group

  • 10%

  • Percentage of the pair's trading volume in the stock between Feb 4 and April 26 last year

And in 10 days during that period, their activity was more than 20 per cent of the market in the shares.

The case involved information sharing between the CSRC and its Hong Kong counterpart, the Securities and Futures Commission (SFC), and comes amid ever-closer ties between the agencies.

Trading Chinese stocks using connect-enabled accounts in Hong Kong has less regulatory oversight because mainland regulators and exchanges have real-time identification of every investor.

While Hong Kong is considering investor identification, for now the authorities in the former British colony can only get such data by requesting it from brokers.

December's start of a second trading link with a mainland city, between Hong Kong and Shenzhen, was accompanied by an agreement to strengthen regulatory and enforcement cooperation between China and Hong Kong, including cross-border investigations into market misconduct.

The CSRC published another case against Mr Tang last Friday, claiming that he and four of his relatives manipulated mainland stocks using seven domestic accounts.

The regulator issued a penalty against the five accused individuals totalling 990.1 million yuan. The SFC also helped collect evidence for the CSRC in the case.

Shenzhen-based Mr Tang, 43, has been punished for illegal trading by the CSRC at least twice before. His previous penalties include 39 million yuan in 2014 and 15 million yuan in 2015.

The CSRC also plans to impose penalties on Mr Xian Yan, a former controller at Guangxi Future Technology, for suspected violations on information disclosure and stock manipulation, said a spokesman at a briefing on Feb 24.

Investor identification may soon be part of the Hong Kong regulator's toolkit. The SFC last year said it planned to consult the market on a system that would allow it to identify investors in real time. The agency said that such a move would allow it to react more quickly to market disruptions.

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on March 14, 2017, with the headline 'China fines traders in first Shanghai-HK stock fixing case'. Print Edition | Subscribe