August 2, 2021

Exclusive: Bond Market Makers Disciplined for Phony Trades

The self-regulator of China’s interbank bond market disciplined three market makers over round-trip trading, the first punishment of such phony transactions.

The National Association of Financial Market Institutional Investors (NAFMII), the regulator, gave a notice of criticism to China Minsheng Bank. It also summoned Guosen Securities Co. Ltd. and Guangdong Nanyue Bank for regulatory talks. The three financial institutions were ordered to make in-depth rectification.

Round-trip trading refers to the unethical practice of purchasing and selling the same bonds at the same prices over and over again to create fake trading volume. The transactions in question took place in multiple sessions in the fourth quarter of 2020 and didn’t reflect reasonable economic purpose, making them in essence fictitious trades, NAFMII said in a statement.

The counterparties for Minsheng…

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