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Recently, the China Securities Regulatory Commission (CSRC) issued the administrative penalties such as confiscation of illegal gains, fines and banning market entry to the two people surnamed Tao and Fu for the case of manipulating the “Blockboard 1502” futures contract. How was the case detected? How should the exchange at the frontline of supervision prevent, investigate and crack down on such trading behaviors violating laws and regulations? An official of the Supervision Division of Dalian Commodity Exchange (DCE) talked about the related information during an interview.
According to the official, it is the principle of DCE to safeguard the “equality, fairness and openness” of the market, to prevent and control market risks and effectively protect the interests of the investors. For years, DCE has adhered to the principle and strengthened the work in market monitoring and supervision by intensifying supervision over unusual transactions, reporting to the CSRC for investigation, improve systems,etc. With the attitude of “zero tolerance”, DCE has investigated and dealt with violations in the market quickly and strictly, tackled small issues early and made earnest and effective efforts to ensure the stable operation of the market, protect the interests of the investors, and promote the market functions. The early detection, reporting and investigation of the Blockboard 1502 case was the result of the DCE strengthening market supervision and investigating and cracking down on the violations.
According to the official, one of the key tools of DCE’s market supervision is the installation of a set of high-performance monitoring and control systems, which can monitor the market risks and violations dynamically and closely. At present DCE is using the self-developed supervision and monitoring system, which involves risk monitoring, real time monitoring, early warning of violations and other functions. The market surveillance personnel of DCE closely monitor the market through the system, and timely analyze and report the discovered signs and clues for violations. Based on the changes in the market, the regulatory requirements and new forms of violations, DCE has continued to improve the system settings to better meet the requirement for market monitoring and supervision. Since 2013, the market surveillance team of DCE has detected more than 300,000 clues of violations from trading, positions, profits and losses, market irregularities and other fields and screened out more than 3,000 clues of unusual transactions. It was in December 2014 that the monitors found the clues of the “Blockboard 1502” when screening various indicators.
The official said that the monitoring system is only the fundamental means for market supervision, and it is critical for DCE to earnestly fulfill the responsibility for frontline supervision and investigate and crack down on the violations rapidly and strictly, so as to prevent the spread of the negative impacts and the accumulation of risks. Since 2013, DCE has investigated and dealt with nearly 800 unusual transactions such as self-trade and spoofing, investigated and dealt with more than 400 violations, imposed measures such as restricting transfer of funds and restricting position opening on nearly 300 clients, and helped the clients redeem a total of over RMB 10 million of economic losses, effectively preventing and controlling the risks. In addition, DCE has discovered and reported 10 cases to the CSRC for investigation, including the “Blockboard 1502” case of suspected market manipulation. After the discovery of the case, DCE organized the research, strengthened the communication with the CSRC, and improved the analysis of the clues for violations and the quality of reporting the cases. In the course of investigating the case, DCE made every effort to support the CSRC in the investigation by sending personnel to join in the investigation team, playing a positive role in smoothly resolving the case.
In recent years DCE has conducted strict supervision over the actual control relationship of accounts and program trading. At the request of the DCE, at the end of 2015, a total of over 5,000 clients in over 2,000 groups reported accounts under common control to DCE, and more than 100,000 clients reported program trading information to DCE. Especially in 2015, according to the characteristics of high-degree participation and rapid development for private equities and large-sized industrial clients, DCE strictly supervised the actual control relationship of the private equities, large-sized industrial clients and other clients, urged a total of over 400 clients in over 30 groups of the private equities and large-sized industrial clients to make declaration, consolidating the foundation for preventing and controlling trading risks, improving the overall compliance level of the market and ensuring the steady operation of the market.
The establishment and improvement of the systems are guarantees for the enhancement of the supervision work and the market compliance as well as embodies the strengthening of the supervisory ability. Since 2013, while making more efforts in investigating and dealing with violations, DCE has attached importance to summarization, advanced the establishment and improvement of the relevant systems, promoted the compliant trading in the market, and effectively prevented and controlled abusive trading practice and market risks. In 2013, for example, in response to a series of cases of stealing funds from others’ accounts through negotiated trade in the market, DCE actively studied the countermeasures, supported the CSRC in a lot of analysis, research and survey, and advanced better implementation of the system of restricting the clients closing out and transferring the profits on the same day in the futures market, effectively curding the occurrence of the cases of stealing funds through matched orders. In 2014 DCE and Dalian Public Security Bureau set up the coordination mechanism for the supervision over delinquency in the futures market, joining hands to intensify the investigation on and treatment of the violations in the futures market. In 2015, in the practice of supervision, DCE found that the futures companies and the service providers of third-party trading terminal software had some shortcomings in recording the trade terminal information of the clients. DCE made some proposals for the improvement and provided helpful approaches to the standardization and normalization of the information management on the client terminal in the futures market.
An official pointed out that strengthening market supervision and monitoring, investigating and dealing with the illegal trading behaviors, protecting the legal rights and interests of investors and effectively preventing and controlling risks are the principle of “equality, fairness and openness” and normal operational order of the market as well as important parts in advancing the transformation of supervision. In 2016, DCE will further strengthen market supervision, focus on deepening and refining the supervision on position limit exemption for hedging clients, intensifying the management of the accounts uneder common control, investigating and cracking down on manipulation and other violations, in order to safeguard the normal market order, protect the legal rights and interests of small and medium-sized investors, promote the healthy and rapid development of the market and better serve the industries and the real economy.
