China tightens rules on forex trading, targets misconduct

Chinas foreign exchange regulator issued guidelines on foreign exchange trading on Friday, targeting market manipulation, fraud and abuses.

The guidelines would help regulate foreign exchange market trading and promote “honest, fair, orderly and efficient” market operations, the State Administration of Foreign Exchange said.

Market participants would be barred from manipulating closing currency prices or other benchmark prices and barred from abusing dominant market positions to influence prices, according to the guidelines.

Market participants would be barred from using non-public, market-moving information to engage in currency trading, or use such information to advise others to conduct trading, the guidelines said.

Market participants should appropriately conduct proprietary currency trading, actively provide market liquidity and adjust supply and demand in the market, and help keep the yuan basically stable at a reasonable and balanced level.

Sources have told Reuters a central bank-led self-regulatory group that helps oversee China‘s foreign exchange industry had asked commercial banks to cap the size of their proprietary trading accounts, which many market participants interpreted as a move to limit financial institutions’ speculation on the yuan.