Short Selling banned in China?


Short selling is selling securities that the seller does not own and borrowing. Short sellers believe that the price of securities will decline in the near future, and can be bought at a lower price to make a profit.

As short sales took off in China

The Chinese stock market has a very limited history of short sales. Since 2007, the government of China, in order to increase the types of financial instruments available to market participants to enter short sales on the market.

By 2008, China Commission on regulation of securities (csrc) announced that it will introduce margin trading and short selling on a trial period, which was deferred in connection with the preparation for the summer Olympics 2008. After the Olympics concluded, a group of 11 top brokerage firms in China, including citic and haitong securities — were allowed to start the judicial process the short sales program.

In March 2010, the Commission began to allow a limited number of shares to be sold short or bought on margin. He started with less than 100 shares, but in the next few years rose to almost 700.

The Commission has issued a recommendation that both short sales and margin buying allowed for the right blue chip stocks with good rates of return and minimum volatility. Firms were required to disclose short-sale trade information daily before 9:00 a.m. on the next trading day.

Position after the stock market crash

In mid-2015, many Chinese trading firms voluntarily — with pressure from the government terminated all stock-shorting activity during the stock market crash of the country. The Commission on regulation of the market has launched a crackdown against “malicious short sellers,” whose high-frequency trading practices had been considered as market manipulation. By August of the same year, the regulators terminated the practice of same-day settlement of transactions for short sellers.

Regulators say they sought to eliminate the practice, when a trader submits an order, but immediately removed before the completion of the transaction, known as “spoofing”.

By March 2016, short sales were resumed on a number of brokerage companies. In may 2017, was declared a set of rules designed to strengthen and stabilize the Chinese markets. One of the key provisions governing sales of major shareholders of listed companies.

(To learn more, see our short Selling tutorial.)

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