Futures contract manipulation is a common type of violation of laws and regulations in the futures market. With the gradual implementation of the futures and derivatives law, such behavior will have nowhere to hide.
On December 29, Northeast Securities Co.Ltd(000686) announced that the China Securities Regulatory Commission decided to file a case against Bohai Rongxing, a wholly-owned subsidiary of Bohai futures, a holding subsidiary, for allegedly manipulating futures contracts.
It is worth noting that at present, the regulators implement “zero tolerance” for illegal acts in the capital market, resolutely crack down on major illegal acts such as vicious market manipulation and insider trading, and comprehensively use a variety of accountability mechanisms to improve illegal costs and protect the legitimate rights and interests of investors. Just recently, there have been cases of futures manipulation sentenced and recovered more than 700 million yuan of illegal income.
At present, the futures and derivatives law, which has received the attention of the industry, has passed the first and second readings and is expected to be officially released after the third reading in 2022.
An industry source told the first financial reporter that there are many individual investors in China’s futures market. The introduction of relevant legislation can balance the rights and obligations between different subjects and protect the legitimate rights and interests of futures investors. For example, for the illegal acts such as insider trading and price manipulation carried out by market subjects, investors can propose civil compensation, which all need corresponding institutional arrangements by law.
Up to now, the total amount of funds in China’s futures market has exceeded 1.2 trillion yuan, an increase of 44.5% over the end of 2020. From January to November this year, the cumulative trading volume and turnover of futures and options on the floor reached 6.919 billion hands and 536.46 trillion yuan respectively, with a year-on-year increase of 28.61% and 40.27% respectively.
Bohai Rongxing was filed for investigation
Specifically, Northeast Securities Co.Ltd(000686) announced on December 29 that the company received a report from its holding subsidiary Bohai Futures Co., Ltd. (hereinafter referred to as “Bohai futures”) on December 28, and Bohai Rongxing (Shanghai) Trading Co., Ltd. (hereinafter referred to as “Bohai Rongxing”), a wholly-owned subsidiary of Bohai futures, received the notice of filing issued by the CSRC because Bohai Rongxing was suspected of manipulating futures contracts, The CSRC decided to file a case against him.
According to public data, the crime of manipulating the trading price of securities and futures refers to using its capital, information and other advantages or abusing its power to manipulate the market, affect the trading price of securities and futures, create an illusion of securities and futures market, and induce or cause investors to make securities and futures investment decisions without knowing the truth, Acts that disrupt the order of the securities and futures markets.
However, the CSRC has not disclosed more details about the alleged manipulation of futures contracts. Northeast Securities Co.Ltd(000686) the announcement said that the company will urge Bohai futures and Bohai Rongxing to fully cooperate with the relevant investigation work of the CSRC, pay attention to the progress of regulatory investigation, and fulfill the obligation of information disclosure in strict accordance with relevant regulations.
In addition, tianyancha information shows that Bohai Rongxing was established in 2016, and Bohai futures indirectly holds 100% shares of Bohai Rongxing through Bohai Rongsheng Capital Management Co., Ltd. Bohai Rongxing has a wide business scope, including international trade, gold products, petroleum products, textile raw materials, edible Shenzhen Agricultural Products Group Co.Ltd(000061) and so on.
Bohai futures was listed in the basic layer company of the new third board in 2017, and it was rated as A-level futures company by the CSRC in 2021. However, the performance is not ideal. In the first half of 2021, Bohai futures realized an operating revenue of 786 million yuan, a year-on-year decrease of 51.04%.
Poor fundamentals even linked the performance of the parent company, Northeast Securities Co.Ltd(000686) financial report shows that the operating revenue of the company in 2020 decreased by 17.06% year-on-year; In the first half of 2021, the operating revenue decreased by 20.71% year-on-year, which was mainly due to the decrease of the spot business of the subsidiary Bohai futures, resulting in the decrease of other business revenue year-on-year.
relevant legislation is approaching, and there is no hiding place for futures manipulation
It is understood that the most illegal behavior in the futures market is the manipulation of futures contracts, which is usually operated by borrowing, renting or using the account group under their actual control for continuous trading or self buying and self selling trading, so as to control the trading price and trading volume of a futures contract.
The reporter reviewed the previous cases of manipulation of futures trading and found that the suspected manipulation of futures contracts for profit was seriously investigated and dealt with. For example, on December 21, the National Audit Office issued announcement No. 5 of 2021: investigation and punishment of discipline and law violations transferred by the audit office, which disclosed that the Audit Office continued to track and understand the investigation and punishment of discipline and law violations transferred to relevant departments. Among the 24 clues of discipline and law violations transferred by the audit to relevant departments, 38 people and 2 companies were seriously investigated and punished, Three local administrative units are seriously accountable. Among them, Yuanda Property Group Co., Ltd. (hereinafter referred to as “Yuanda property”) was fined 300 million yuan, the largest amount.
Specifically, from May to August 2016, Yuanda Petrochemical Co., Ltd. (hereinafter referred to as “Yuanda petrochemical”), a subsidiary of Yuanda products, took advantage of its financial advantages to control 18 futures accounts and bought a large number of polypropylene futures contract pp1609 continuously. At the same time, it hoarded a large number of spot in the spot market through direct purchase, purchasing and holding on behalf of others, creating an atmosphere of strong demand for polypropylene and affecting the price of futures contract, Suspected of manipulating the futures market.
At that time, Yuanda Petrochemical manipulated the pp1609 contract price for more than three months, a total of 70 trading days. During this period, the pp1609 contract price started from 6280 yuan / ton, reaching a maximum of 8516 yuan / ton, with a cumulative increase of more than 30%, of which the daily limit was recorded on June 27 and July 4.
Finally, in September 2020, Yuanda Petrochemical was fined 300 million yuan and recovered 437 million yuan of illegal income for the crime of manipulating the futures market; Wu Xiangdong, the former legal representative of Yuanda petrochemical, was sentenced to five years’ imprisonment for the crime of manipulating the futures market, fined 5 million yuan and recovered 4.8758 million yuan of illegal income.
The CSRC previously said that it manipulated the market to create false prices, triggered market fluctuations and disrupted the normal order of the market, and the regulatory authorities always maintained a high-pressure situation.
Industry insiders told the first financial reporter that at present, China’s current “Regulations on the administration of futures trading” only stipulates the administrative and criminal legal liability of the manipulation actor, and the provisions on civil liability are still blank, which is not conducive to the effective protection of the legitimate rights and interests of investors. With the second reading of the futures law, derivatives legislation tends to be improved, strictly restrict industry norms, and clearly and effectively punish illegal acts.
Recently, Fang Xinghai, vice chairman of the CSRC, mentioned at the 2021 international futures conference that since this year, breakthrough progress has been made in the formulation of the basic law of the futures industry. The futures and derivatives law has passed the first and second readings and is expected to be officially released after the third reading in 2022.
At present, according to the contents of the draft, the futures and derivatives law has significantly increased the amount of administrative fines and confiscations in order to effectively restrict violations in the futures market.
According to Article 142 of the draft, whoever manipulates the futures market shall be ordered to make corrections, the illegal income shall be confiscated and a fine of not less than one time but not more than ten times the illegal income shall be imposed; If there is no illegal income or the illegal income is less than 1 million yuan, a fine of not less than 1 million yuan but not more than 10 million yuan shall be imposed.
In addition, in terms of investor protection in the futures market, the draft mentions that when traders file futures civil compensation litigation such as market manipulation and insider trading, if the subject matter of the litigation is the same type and there are a large number of parties, representatives can be elected according to law.
(First Finance)
