China tightens legal traps to snare stock market "rats"

 BEIJING, June 28 (Xinhua) -- China has stepped up legal measures to crack down on stock market insider trading, targetting "rat trading" in particular to end the malaise of trading undisclosed information.

File photo: VCG

A judicial interpretation jointly issued by the country's top court and top procuratorate on Friday made specific stipulations on what qualifies as "other undisclosed information" in insider trading under the Criminal Law, what "violations" entail and what counts as "severe" and "extremely severe" offenses.

"Rat trading" is also known as front-running in U.S. and European markets. In a typical case, fund managers buy stocks via their own accounts before the financial institutions they work for make large deals and then sell the stocks to make personal gains after the prices rally.

Such violations used to be rampant until regulators stepped in to restore market order, and a number of criminal convictions have been meted out since 2017.

The judicial interpretation issued Friday aims to eliminate legal "grey areas" for such practices. Among other things, it made knowledge of investment decisions and trading orders part of "other undisclosed information," the trading of which is punishable by the Criminal Law.

In addition, anyone who bags illegal gains over 1 million yuan (147,000 U.S. dollars) will be counted as having made a severe offense.

The interpretation will take effect from July 1, 2019.