Background
According to the market surveillance, several futures accounts (belonging to Qian, Yu, and Liao, among others) were suspected to have engaged in disruptive trading activities. These accounts were also suspected to be linked by unreported actual control relationship. If true, it would mean they had also violated the exchange’s rules on position limit and trading limit.

Investigation
Investigation revealed that Qian, Yu, Liao, and Hu controlled ten futures accounts under the names of ten individuals. Taken together, from April 2015 to February 2018, these accounts exceeded the position limit for several times on a certain futures contract and the trading limit for several times from December 2016 to September 2017, causing serious disruptions to the market.

Having not reported their accounts as linked by actual control relationship violates Article 39.1.3 of the Enforcement Rules of the Shanghai Futures Exchange（2018 version）, i.e., “making any report, representation, explanation, or statement which is fraudulent or misleading, or omits any material facts.” Their violation of the position limit and trading limit was considered an aggravating factor in this case.

Sanctions
SHFE decided to (1) give a reprimand to the ten individuals including Qian, Yu, Liao, and Hu; (2) order Qian, Yu, Liao, and Hu to make corrections, suspend them from opening positions for six months, and impose a fine of RMB 200,000 on each; and (3) order Yu, Qian, Ma, Yu XXX, Wang, and Xiang to make corrections, suspend them from opening positions for three months, and require them to strengthen account management to prevent similar incidents in the future. These penalties were also kept in the integrity record database for the securities and futures markets.

The Lesson
The rules of a futures exchange have set out the duties and obligations of clients, members, and the exchange in each part of the trading process, such as the obligation to report accounts linked by actual control relationship, program trading, and large trader positions, and the duty to manage abnormal trading activities.
Clients should strictly observe these rules and improve awareness for compliance. Serious violations will be punished in accordance with the Enforcement Rules and the penalties will be kept in the integrity record database for the securities and futures markets.

This case has the Chinese version on the SHFE website. If there is any discrepancy between the English version and the Chinese version, the Chinese version shall prevail.