Aug 15, 2020 06:28 PM

Securities Watchdog’s New Draft Rules Target Dodgy Third-Party Trading Platforms

China’s securities watchdog has issued draft regulations aimed at tightening control over how brokerages should use third-party platforms, following a spate of private data leaks and concerns that some apps may be operating illegally.

The draft rules (link in Chinese) released Friday by the China Securities Regulatory Commission (CSRC) stipulate that securities firms must “guarantee technical security” by running their own information systems and ensuring third-party platform operators cannot get their hands on clients’ data.

They bar the platforms from offering similar services to those provided by securities firms, such as finding investors and receiving trading instructions, and require brokerages to clearly inform investors when they are using services on third-party platforms. The commission is soliciting public feedback on the regulations until Sept. 15.

The publication of the draft rules follows a string of data breaches on third-party platforms and longstanding concerns that certain apps are engaging in illegal or unethical business practices.

In April, investors at several securities firms who traded on the stock information app of Hithink RoyalFlush Information Network Co. Ltd., a Chinese data services company, were shocked to find their accounts had been hacked (link in Chinese) and some of their stock holdings sold.

In 2018, the CSRC instructed some Chinese banks to stop running securities accounts on apps operated in collaboration with certain brokerages after the platforms were found to be running pop-up advertisements and embedded trading features that heightened the risk of data leaks, Caixin learned from sources familiar with the matter.

The CSRC said in a Friday statement (link in Chinese) that “relevant entities,” believed to refer to the third-party platforms, could take advantage of opportunities to serve brokerages by facilitating securities transactions without proper authorization. Some platforms might also illegally collect investors’ private data, it added.

“To attract clients in the short term and improve the vibrancy of trading, some securities firms (that use third-party platforms) ignore the hidden risks of such new practices,” the watchdog said.

Contact reporter Timmy Shen ( and editor Matthew Walsh (

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