China Stamps Out "Rat Traders" To Boost Stock Market Confidence

Tyler Durden's picture

The utilization of the Chinese market as both policy tool and 'wealth' creator - as The Fed has done with the S&P 500 - remains less than the PBOC would like. It appears the Chinese prefer their 'risk' in Baccarat and real estate and don't trust those stock markets shisters... so the government is doing something about it. While American investors have to worry about high-frequency traders front-running them; in China, it's a low-frequency trade called "rat trading" where fund managers use personal accounts to buy shares cheaply, then sell them at a profit after purchases from the funds they manage have boosted their value. China’s securities regulator has decided enough is enough and has stepped up its probe into insider trading, taking on “rat traders” in an attempt to restore confidence in the country’s stock market.


As The FT reports, insider trading is widely viewed as commonplace on China’s domestic bourses, in a market weighed down by poorly performing state-controlled companies... and the government has had enough...

China’s securities regulator has stepped up its probe into insider trading, taking on “rat traders” in an attempt to restore confidence in the country’s stock market, which is widely viewed as being rife with corruption.


Rat trading is a form of front-running in which fund managers use personal accounts to buy shares cheaply, then sell them at a profit after purchases from the funds they manage have boosted their value.

And they are serious...

The China Securities Regulatory Commission said it had uncovered evidence of criminal wrongdoing by five former fund managers at Shanghai-based HFT Investment Management, which is part-owned by BNP Paribas. The CSRC on Friday said that it had turned the cases over to police.


The CSRC has opened 25 insider trading investigations since the start of the year, up from 22 for all of 2013, and has referred 29 cases to police and prosecutors, up from 21 in 2013, according to data from the CSRC published in late June.


At least 178 fund managers have left their jobs during the first six months of this year, compared with 150 during all of 2013, according to an analysis of official figures by Z-Ben.

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The corruption probe appears to be showing results but for now the Shanghai Composite remains underwhelmed in terms of dragging investors back into the risk pool.

On a side note - if China can do this, why can't the SEC?

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TeamDepends's picture

SIERU smells a rat!

NoDebt's picture

Translation:  PBOC exclaims "Why can't we create equity bubbles on-demand, like everyone else?"  

They did 10X the QE of the Fed and Japan combined the last couple of years.  Still no equity market bubble.  They're yellow with envy.  "Why can't we get results like that?" they cry.  

bunzbunzbunz's picture

Every nation wants to inflate their currency to destroy the debt they've incurred. It is that simple. The dollar will get inflated so much that it becomes difficult for cash using commoners to use. The dollar is getting replaced by bitcoin. Get some free at

long-shorty's picture

lol at China or the SEC cracking down on corruption. "cracking down" means dropping the hammer on one's political enemies.

look at Montage Technology (MONT). here we have a company with about 70% of its revenue flowing through a ridiculous one-man shell in Hong Kong, the company has been told three times by a branch of the Chinese govt to stop making illegal chips (which likely comprise the 70% of its revenue), and yet a Chinese state-owned entity is buying the company in a takeover offer. meanwhile, even though the company is months behind on its annual report (they still haven't filed for a 10-K for the year ending Dec 31 2013!!!), the SEC has taken ZERO action and is allowing a shareholder vote on the buyout offer to go through.

those with money and power protect one another and harm their enemies. that is just how the world works. any notion of a state that is sincerely interested in the common good is dead, dead, dead.

CrazyCooter's picture

Why are the best-est, secret-est insider-est trades on public forums?

You're a f***ing idiot.

Buy, hold, and laugh.



bunzbunzbunz's picture

I agree exactly with that sentiment...I'm confused at why you are calling me an idiot.

I don't give a shit about secrets. I just want people to use my referral link to get bitcoins...They get the same amount whether or not they use my link. So it does not hurt them. I think it is getting more and more evident that the US government supports Bitcoin. So why the hell would you not want to have some just to have?

Never One Roach's picture

I work with several Chinese who came over from the Mainland and they call the stock market, "the black hole" and would never touch it again after 2008. Asked what they invest in or what they want to buy they all said the same ting...."gold" and all of them are saving to buy a house back home in their home city.

logicalman's picture

There's now no point in satire or comedy.

The world has now become a huge, really bad joke.

The only sane response, IMHO, is to take part as little as possible.

Oh, yes, and drink heavily.

TeamDepends's picture

Brother, we feel your pain.  But when you say, "There's now no point in satire or comedy", well, it says, "I'm ready to suck Hillary's cock".  And most of us here are not ready to go that far.

bunzbunzbunz's picture

Your father thought the same thing about the activities of your generation. Congrats on being predictable.

ebworthen's picture

Hand them over to the street vendors; problem solved.

Yen Cross's picture

  No conflict of interest here... I'll bet they also lever up 100:1 will all their buddies in some darkpool.

  I predict a 1000% increase in nailgun sales in China for 2015.

kill switch's picture


Comedy is a fascinating thing in this context

techstrategy's picture

China is becoming what we used to be and we are regressing to what China was...  Now all it needs to do is announce fractional gold backing of the RMB and the financial sector games will have delivered a devastating blow to our standard of living.  The Fed and its TBTF owners have done more damage to this country than any treasonous traitor ever has...

RaceToTheBottom's picture

They need to step up their corruption game.

I suggest some WS consultants to up their learning curve...

Leonardo Fibonacci2's picture

Ho Lee Fuk Sum Ting Wong 

BOPOH's picture

Rats are smart!

NoWayJose's picture

At least the rat traders are front running with their own money, and there is a chance that they might lose money. In the US, traders use huge volume of free Fed money to front run and have no fear of losing money.

kurt's picture

Financial Advisors Cheat?

vyeung's picture

That's because the idiots still think the Fed is owned by the government. It's PRIVATE. PBOC and all the affiliates are publicly owned by the Chinese people. You can't probe the criminals that are running the system.


MFL8240's picture

Need go no further than JP Morgan and Goldman Sachs (USA) but, they will not be touched until the people have had enough of these two sewer sytems!

Notsobadwlad's picture

The US is full of 'Rat Traders". Only, our rat traders are the large international banks, their bankers and their cronies. China had to learn from someone. One can say that without Rat Trading in the US there would be no market ... but it is also what has destroyed the market. No honest person wants to play in a crooked game.