High Frequency Trading Firm Citadel Receives Three Month Ban From Chinese Markets


High Frequency Trading Firm Citadel Receives Three Month Ban From Chinese Markets

In its latest attempt to stabilize China’s stock exchange and economy as a whole, the Chinese government has imposed a three-month trading suspension on several trading accounts, with one being Citadel Shanghai Trading, a subsidiary owned by the United States company, Citadel Investment Group. The firm’s trading account has been suspended on the Shenzhen stock exchange but is allowed to conduct business on the Shanghai exchange.

Citadel is best known for being an ultra-successful high frequency trading (HFT) firm that operates questionable yet highly profitable trading strategies. It also notoriously close to the federal reserve, seeming to fill a niche left vacant when big Wall Street banks became subject to increased regulation after the 2008 financial crisis.

The government’s suspension of Citadel Shanghai Trading is just one of the measures taken to shore up investor confidence in China’s volatile stock markets. In addition to setting interest rates, prohibiting certain institutional investors from trading on the markets and the devaluation of Chinese currency, the government is also conducting extensive investigations into any investor possibly manipulating the markets.

Citadel’s account was suspended by China’s security authorities after an investigation found alleged frequent purchases and cancellations of stock orders, otherwise known as spoofing or a “high order cancellation rate.” The investigation shone a spotlight on Citic Securities, China’s largest brokerage firm and a former partner of Citadel Shanghai Trading.

Citadel Shanghai Trading was created in 2010 when Citadel Global Trading and Citic United Venture Capital formed a joint venture. The creation of Citadel Shanghai Trading was good news for the Chinese government and an analyst states that, “Following the collapse of the bull market in 2008, Beijing authorities hope foreign institutional investors can introduce stock trading expertise into China and inject more liquidity into the market.”

Following this week’s suspension, Citadel released a statement that, “We can confirm that while one account managed by Guosen Futures Ltd - Citadel (Shanghai) Trading Ltd - has had its trading on the Shenzhen Exchange suspended, we continue to otherwise operate normally from our offices, and we continue to comply with all local laws and regulations.”

Despite the recent suspension from the Shenzhen stock market, it is reported that Citadel has never been accused by any government for “spoofing” or manipulating stock markets.

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