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China brokerages complete audit on "grey market" lending: Sec Times

[SHANGHAI] Chinese brokerages have completed a probe of its external information systems, which regulators said must not be used as channels to facilitate "grey market" margin financing, market manipulation and other illegal activities, the Securities Times reported, citing unidentified sources.

Brokerages have also stopped connecting their own systems with trust accounts, while the Securities Association of China is drafting rules to regulate the practice of connecting to external information systems, the newspaper said.

China has been cracking down on "grey market" financing of share purchases, often seen in the form of so-called umbrella trust products. Such lending practices, estimated by some analysts to be worth over 1 trillion yuan (S$218 billion), are not regulated.

Regulators have also urged brokerages to tighten rules on regulated margin loan businesses, which is worth over 2 trillion yuan.