China exchange suspends stock trading account of US firm

The Shanghai Stock Exchange, meanwhile, has suspended four trading accounts for serious trading irregularities that influenced market pricing.

China’s markets regulator has suspended a trading account of US-based hedge fund Citadel LLC, the fund said on Monday, in the watchdog’s first known move against a big foreign investor as it battles to prop up China’s ailing stock markets. The government didn’t name any of the parties behind the restricted stock accounts.

Xinhua said late Sunday that one of the 24 accounts in the initial batch was owned by Citadel, but cited state-owned CITIC Securities as denying it was involved with that particular account.

These three funds share a number of common features: they were all authorised by the China Securities Regulatory Commission (CSRC) on July 28; they opened for subscription for just one day via the companies’ direct sales channels; and they all closed for subscription on the morning of July 31, according to the companies’ filings.

The adoption of the T+1 rule for short selling won’t affect normal margin trading and securities financing, and will help safeguard the market stability, the Shenzhen exchange said in the statement posted on its microblog on Monday. The gains were driven by what in many cases resembled gambling by mom-and-pop investors.

As the Chinese stock market has continued to experience volatile trade, China’s securities watchdog continues to consider actions to stabilize stocks. The state-affiliated Shanghai Securities News wrote (link in Chinese), “Never let the bailout [meaning, the government’s all-out stock market rescue package] become the cash machine for those malicious program traders”. The unit said it would cooperate.

Citadel, one of the world’s largest hedge funds with about US$26 billion under management, has made it a priority to ramp up investing in China.

Lingling Wei in Beijing and Yifan Xie in Shanghai contributed to this article.