Earlier, Caijing reporter reported that according to the notice of the head office of the People's Bank of China, the relevant departments of Shenzhen Branch of the People's Bank of China required all legal person payment institutions to conduct risk investigation on 40 foreign exchange trading platforms suspected of violating regulations. (See Caijing: The central bank investigated and dealt with 40 illegal foreign exchange trading platforms and stopped business cooperation with payment institutions.)
The industry believes that the regulatory authorities require payment institutions to investigate risks mainly because the risks exposed by illegal Internet foreign exchange trading platforms cannot be ignored. Since this year, there have been many foreign exchange trading platforms in China.
According to Caijing reporter, there are two main types of foreign exchange trading platforms currently active on the Internet. The first is trading agent, that is, an overseas broker who directly interfaces with the international foreign exchange trading market and is approved by foreign regulatory agencies. The second is to take regular overseas brokers as gimmicks, take direct participation in international market transactions as bait, promise high returns, and conduct financial fraud by pyramid schemes or fund-raising.
This kind of foreign exchange margin trading, commonly known as "speculation in foreign exchange" by insiders, was introduced to China in the late 1980s, and there was an upsurge of "speculation in foreign exchange" in Shenzhen and Beijing in the early 1990s. Therefore, as early as 1994, the CSRC, the foreign exchange bureau, the State Administration for Industry and Commerce and the Ministry of Public Security jointly issued a notice, clearly making it illegal for institutions to engage in foreign exchange futures and foreign exchange deposits transactions without the approval of the regulatory authorities and for institutions and individuals to entrust unapproved institutions to participate in such transactions. In the name of futures consulting and training, it is also illegal to illegally operate foreign exchange futures and foreign exchange deposits in China.
It is understood that up to now, the relevant departments in the State Council have only approved banks and a few non-bank financial institutions to conduct spot foreign exchange transactions with customers. At present, no institution has the permission of relevant departments in the State Council to trade foreign exchange futures and foreign exchange deposits.
An industry insider said in an interview with Caijing that it is illegal for any institution to provide foreign exchange margin transactions for this product, and it is also illegal for any institution or individual to participate in such transactions. He stressed that it is illegal for these institutions to provide foreign exchange margin trading in China, even if they have relevant foreign licenses.
In recent years, regulators have repeatedly issued a document reaffirming this point. In 2008, the foreign exchange bureau explicitly replied that no unit or individual may engage in foreign exchange deposit trading without the approval or filing consent of the industry supervision department according to law. The China Banking Regulatory Commission also issued a document stipulating that banking financial institutions may not start foreign exchange margin trading business or in disguised form before the relevant management measures are officially promulgated.
Therefore, experts in the industry suggest that the regulatory idea of "opening the front door and blocking the evil door" should be adopted for foreign exchange margin trading. One scheme is for existing licensed financial institutions to provide such services, and the other scheme is to establish a standardized access principle so that both financial institutions and non-financial institutions can participate in this market under certain conditions. However, for the regulatory authorities, no matter which scheme, it is necessary to clarify the regulatory subject and regulatory principles, such as leverage ratio, third-party deposit of funds, and investor suitability.