Update | US hedge fund Citadel banned from share trading on Shenzhen account
Citadel Securities, a unit of US hedge fund Citadel, said one of its accounts in China has been barred from trading shares by securities regulators, making it one of the first foreign institutional investors to be caught up in Beijing's crackdown on "malicious short-selling" that the central government has blamed for the recent market rout.
Citadel Securities, a unit of US hedge fund Citadel, said one of its accounts in China has been barred from trading shares by securities regulators, making it one of the first foreign institutional investors to be caught up in Beijing's crackdown on "malicious short-selling" that the central government has blamed for the recent market rout.
The targeted account was managed by a Shanghai-based futures trading firm owned by Citadel, the Chicago-based hedge fund said. It was among 24 accounts barred from the mainland's two major stock exchanges on Friday for three months.
"We can confirm that while one account managed by Guosen Futures - Citadel (Shanghai) Trading - has had its trading on the Shenzhen Exchange suspended, we continue to otherwise operate normally from our offices, and we continue to comply with all local laws and regulations," Citadel said.
The order to bar the Citadel account was given by the Shenzhen stock exchange.
The China Securities Regulatory Commission has said "coordinated stock dumping" and "selling-off of heavily weighted stocks" as well as automated, algorithm-driven trading caused market turbulence. Citadel is being probed for "spoofing", a practice that involves placing and then cancelling orders, distorting prices in the process.
Beijing's moves show the regulators are "cleaning up" what they believe to be the black sheep in the market, said Oliver Rui, a finance and accounting professor at the China Europe International Business School.
"Some hedge funds might have taken advantage of the regulatory loopholes in China for arbitrage opportunities," Rui said. "Automated trading is an area Beijing ought to be concerned about as it has been a major driver of US stock market crashes."
On Saturday, 10 more accounts were frozen by the Shanghai and Shenzhen stock exchanges for what they termed "irregular trading" or "hedging".
Meanwhile, the CSRC said it had been investigating 52 cases where major shareholders and senior management "reduced holdings of their listed companies in an unlawful manner".
Citadel is one of the world's most reputable hedge funds and former US Federal Reserve chairman Ben Bernanke is planning to join it as a senior consultant.
