Almost precisely one year ago the Chinese market nosedived on “black monday“. Dow Jones opened 1000 points lower. The Chinese regulators were uncomfortable with the concept of free markets. The China Securities Regulatory Commission (CSRC) came up with a strange package of measures. The goal was to keep the markets from falling. Selling futures was ill-advised, trading volume dropped 99%.
IMC confirms investigation
All trading firms in Shanghai came under scrutiny. Dozens of traders, investors and journalists were arrested. Police raided offices of foreign trading firms. Everybody is scared of the unpredictable Chinese regulators. Nobody felt like giving public comments about the matter.
Until IMC confirmed to Bloomberg it is undergoing investigation by the Chinese authorities.
IMC fined with 500 million Renminbi
Sources insist IMC Financial Markets is fined with 500 million Renminbi by the Chinese authorities. That’s € 67 million – five times the annual profit of their Shanghai trading operations. A lot of money for regular high frequency trading. To put it in perspective, the profit last year for IMC was €185 million.
The status of the fine is unclear. The spokesman of IMC is Ian Bickerton. He is one of the most highly regarded public relation advisors in The Netherlands. He calls the discussions between IMC and the regulator constructive and positive. Maybe this means IMC can go into appeal. Mr. Bickerton wasn’t able to respond.
What IMC did last summer
IMC Financial Markets has been trading in China mainland in a regular “high frequency” fashion. The CSRC turned allergic to speed trading, and sees it as market manipulation. These days it’s illegal to buy and sell the same instrument on the same day.
Citadel sees assets frozen
In other words, IMC probably hasn’t done anything wrong. When selling turns in a crime, every trade is suspicious. Another household name in the industry, Citadel, is having other problems. The rumor is Citadel still has $300 million of assets frozen in China.