Nick Leeson warns Hong Kong of Shanghai stock connect’s ‘rogue trading’ risks

Rogue trader Nick Leeson says the surge in trading volume and rapid pace of regulatory change around the Shanghai-Hong Kong stock connect have created conditions ripe for market manipulation.

The trader who famously broke Barings Bank in 1995 by making unauthorised bets on the futures markets in Singapore said the explosive pace of change had likely created a mismatch in available information to stock market dealers and regulators.

"Wherever you've got change or a need to consolidate [information], there are opportunities for wrongdoing," Leeson told the South China Morning Post after giving a speech at the city's Bankers Club.

"Anybody who is going to do something wrong is not standing still, whether that is cybercrime or anything else within the financial industry. You have to keep pace with it and get ahead of the curve and typically [regulators] are behind it."

Daily trading volume on the Hong Kong stock exchange rocketed during April after a regulatory easing gave mainland mutual funds easier access to the scheme that directly links the city's bourse with Shanghai. It hit a record HK$291.5 billion on April 9, more than three times the daily average. It has eased since, but is still roughly twice the daily average before the scheme's launch.

That is a red flag to Leeson, given his own experiences 20 years ago.