China Ceases OTC Work in Order to Prevent Financial Risks
The Securities Association of China has ordered the suspension of the OTC (over-the-counter) platform to reduce risk in the financial system. According to some sources, the suspension comes after signs that options in the OTC market, which change hands among institutions including commercial banks, private funds and brokerages, have been sold to retail investors in some cases.
According to Hwabao Securities data, trading turnover of OTC options jumped 44.2% last year to 501.1 billion yuan ($79.85 billion), while options traded on the Shanghai Stock Exchange have also witnessed rapid growth recently. Earlier this year, China suspended publishing its volatility index following a stock market rout, stepping up efforts to curb speculative trading. The action echoes other measures regulators have taken recently to eliminate risks, as Beijing makes financial stability a key priority this year.
It is unknown now when the business will be resumed, as the Securities Association of China declined to comment.