China’s top securities regulator will send inspection teams next week to check whether brokerages’ higher-risk margin trading businesses comply with regulations, three brokerage sources told Reuters on Thursday.
The inspections would check whether margin trading services complied with procedural regulations, such as whether clients met the criteria to open an account, a broker source said.
However, industry insiders said the probes were part of a wider cleanup on the margin trading business.
There has been a steady relaxation of restrictions on margin trading in the last two years, and while in good times it allows investors to make a lot of money with only a small amount of their own cash, it also carries big risks when the market falls.
According to official data, the value of margin trading and short-selling in Shanghai and Shenzhen as of Tuesday totaled 929.2 billion yuan ($150.14 billion).