[Reported by Lutou Society on March 16, 2016] On March 2, 2016, the CSRC’s official website published an article titled “Q&A on Rectifying and Regulating Various Trading Venues” in the Investor Protection section of the Ningbo Securities Regulatory Bureau. The language used in this article was unusually harsh. Recently, the CSRC has been intensively publishing related articles on its official website, and it is also reported that the CSRC has begun conducting rectification work at several large trading venues. Going forward, trading venues will not only face stringent oversight by their local governments but will also be subject to a thoroughly firm stance from the CSRC itself—this development may be linked to the recent appointment of the new chairman of the CSRC.

I. Before participating in transactions at various local trading venues, what policies and regulations do investors need to be familiar with, and what are the main prohibitions?
 
Answer: Before participating in trading activities at various local trading venues, investors are advised to gain a necessary understanding of the state’s laws, regulations, and policy documents pertaining to trading venues. These laws, regulations, and policy documents primarily include the Securities Law, the Regulations on the Administration of Futures Trading (Decree No. 489 of the State Council), the Decision of the State Council on Clearing Up and Rectifying Various Trading Venues and Effectively Preventing Financial Risks (Guofa [2011] No. 38), the Implementation Opinions of the General Office of the State Council on Clearing Up and Rectifying Various Trading Venues (Guobanfa [2012] No. 37), and the Special Provisions for Spot Commodity Market Trading (Trial) (Ministry of Commerce Order [2013] No. 3). In addition, there are also relevant policy documents issued by national ministries and commissions such as the People’s Bank of China. For specific details, investors can consult the official websites of the relevant national authorities.
 
Among these, Document No. 38 [2011] issued by the State Council and Document No. 37 [2012] issued by the General Office of the State Council set forth six prohibitive requirements targeting various local trading venues, specifically:
 
(1) It is prohibited to divide any equity interest into equal shares for public offering. Any trading venue that, by leveraging its services and facilities, divides equity interests into equal shares and then offers them to investors shall be deemed to have engaged in a “public offering of equal shares.” The public offering of shares by joint-stock companies shall be governed by the relevant provisions of the Company Law and the Securities Law.
 
(2) Trading shall not be conducted through centralized trading methods. “Centralized trading methods” include methods such as call auctions, continuous auctions, electronic matching, anonymous trading, and market makers; however, negotiated transfers and auctions conducted in accordance with the law are excluded from this definition.
 
(3) Rights and interests may not be continuously listed for trading in standardized trading units. “Standardized trading units” refer to setting a minimum trading unit for rights and interests other than equity, and trading these rights and interests in multiples of the minimum trading unit or its integer multiples. “Continuous listing for trading” means listing the same trading variety for sale within 5 trading days after purchasing it, or listing the same trading variety for purchase within 5 trading days after selling it.
 
(4) The cumulative number of beneficial owners shall not exceed 200. Except as otherwise provided by laws and administrative regulations, during the entire term of any equity interest—whether at the issuance or transfer stage—the cumulative number of actual beneficial owners shall not exceed 200. For interests held through trusts, agency arrangements, or other similar mechanisms, the number of actual beneficial owners shall be counted accordingly.
 
(5) Standardized contract trading via centralized trading platforms is prohibited. “Standardized contracts” encompass two types of arrangements: one type is uniformly formulated by the trading venue, with all terms—except for the price—being fixed, and stipulating that a specific quantity of the underlying asset will be delivered at a specified time and location in the future; the other type is also uniformly formulated by the trading venue, granting the buyer the right to buy or sell the agreed-upon underlying asset at a predetermined price at a specified time in the future.
 
(6) No trading venue engaged in the trading of financial products such as insurance, credit, and gold may be established without prior approval from the relevant financial regulatory authorities under the State Council. Furthermore, no other trading venue may engage in the trading of financial products such as insurance, credit, and gold.
 
2. Does the “carbon trading” initiative promoted by the National Development and Reform Commission need to comply with the cleanup and rectification policies?
 
Answer: Currently, relevant ministries and commissions, including the National Development and Reform Commission, are piloting carbon emission rights trading in cities such as Beijing, Shanghai, and Shenzhen. Carbon emission rights trading must comply with the provisions of Document No. 38 [2011] issued by the State Council and Document No. 37 [2012] issued by the General Office of the State Council. Specifically, rights may not be divided into equal shares for public offering; they may not be traded through centralized auction or market maker mechanisms. Rights may not be continuously listed for trading in standardized trading units. Any investor who buys and then sells—or sells and then buys—the same trading variety must wait at least five trading days between transactions. Except as otherwise provided by laws and administrative regulations, the cumulative number of holders of these rights may not exceed 200. Standardized contract trading via centralized trading methods is also prohibited.
 
3. Do some e-commerce companies that engage in trading of bulk commodities, precious metals, and other such products need to comply with the relevant policies for cleanup and rectification?
 
Answer: Currently, some institutions—such as certain e-commerce companies—though their names do not include terms like “exchange,” “trading center,” or “trading market,” are nonetheless engaging in unauthorized trading of standardized contracts in their actual operations. All such institutions must comply with the relevant provisions of cleanup and rectification policies, including Document No. 38 [2011] issued by the State Council and Document No. 37 [2012] issued by the General Office of the State Council. In response to a period during which some companies, under the guise of e-commerce, conducted centralized trading of standardized contracts, six government departments—the China Securities Regulatory Commission, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Commerce, the State Administration for Industry and Commerce, and the China Banking Regulatory Commission—jointly issued in December 2013 the “Notice on Prohibiting the Conduct of Standardized Contract Trading Activities Under the Pretense of E-commerce” (CSRC [2013] No. 74), further reinforcing the requirements regarding such illegal activities.
 
4. Does the online marketplace’s transaction business need to comply with the relevant policies for cleanup and rectification?
 
Answer: Trading activities organized by online marketplaces such as Taobao and JD.com constitute a form of sales of physical goods and are subject to compliance with relevant laws and regulations, including the Contract Law, as well as policy documents pertaining to the circulation of goods. However, if certain trading venues conduct business through online marketplaces, they must adhere to the provisions of documents such as Guofa [2011] No. 38 and Guobanfa [2012] No. 37—regarding cleanup and rectification—and may not engage in standardized contract trading via centralized trading platforms.
 
V. What are the responsibilities of the Inter-Ministerial Joint Conference on Rectifying and Regulating Various Trading Venues? And what is the role of the China Securities Regulatory Commission within this framework?
 
Answer: According to Document No. 38 [2011] issued by the State Council and the “Reply of the State Council on Approving the Establishment of an Inter-Ministerial Joint Conference System for Rectifying and Regulating Various Trading Venues” (Guo Han [2012] No. 3), the Inter-Ministerial Joint Conference for Rectifying and Regulating Various Trading Venues (hereinafter referred to as the “Joint Conference”) is jointly established by the China Securities Regulatory Commission and more than 20 other government departments. Its primary responsibilities include coordinating and integrating the efforts of relevant departments and provincial people's governments in carrying out the rectification and regulation of various trading venues, and supervising the establishment of standardized management systems for trading venues and trading products. The Joint Conference does not replace the regulatory responsibilities of the relevant departments under the State Council or the provincial people's governments. Supervision is one of the ways in which the Joint Conference promotes the rectification and regulation work carried out by provincial people's governments; it is an ongoing, continuous process aimed primarily at coordinating and aligning the overall deployment and arrangements made by provincial people's governments for the rectification and regulation efforts, providing policy interpretations and guidance, and requiring localities to strengthen their regulatory framework and establish long-term management mechanisms.
 
The day-to-day operational body of the joint meeting is located at the CSRC, responsible for handling routine tasks and implementing the relevant decisions made by the joint meeting.
 
6. What are the admission procedures for various trading venues during their establishment phase? And who oversees their daily operations?
 
Answer: According to the provisions of Document No. 38 [2011] issued by the State Council and Document No. 37 [2012] issued by the General Office of the State Council, provincial-level people's governments shall prudently approve the establishment of various trading venues in accordance with the principles of “total volume control, rational layout, and prudent approval.” Any newly established trading venue using the term “exchange” must, unless approved by the State Council or the financial regulatory authority under the State Council, obtain prior approval from the provincial-level people's government. Before granting such approval, the provincial-level people's government shall solicit the opinions of the Inter-Ministerial Joint Conference on the Rectification and Regulation of Various Trading Venues.
 
Documents No. 38 [2011] of the State Council and No. 37 [2012] of the General Office of the State Council stipulate that, except for trading venues established with the approval of the State Council or the financial regulatory authorities under the State Council to engage in financial product trading, all other trading venues shall be subject to daily supervision, violation handling, and risk management by the provincial-level people's governments according to the principle of local jurisdiction. Each provincial-level people's government shall formulate regulatory systems for various types of trading venues within its jurisdiction, clearly define the regulatory agencies and their respective functions for each type of trading venue, strengthen daily supervision, and establish long-term mechanisms.
 
7. Which trading venues are regulated by the China Securities Regulatory Commission?
 
Answer: According to the provisions of laws and regulations such as the Securities Law and the Regulations on the Administration of Futures Trading, the trading venues under the regulatory jurisdiction of the China Securities Regulatory Commission (CSRC) include stock exchanges and futures exchanges, specifically the Shanghai Stock Exchange and the Shenzhen Stock Exchange; the Shanghai Futures Exchange, the Dalian Commodity Exchange, the Zhengzhou Commodity Exchange, and the China Financial Futures Exchange. In addition, in accordance with relevant documents issued by the State Council, the CSRC is also responsible for regulating the National SME Share Transfer System Co., Ltd.
 
8. What are the venues where gold trading can be conducted? Who manages these venues?
 
Answer: According to the “Notice of the People’s Bank of China, Ministry of Public Security, State Administration for Industry and Commerce, China Banking Regulatory Commission, and China Securities Regulatory Commission on Strengthening the Management of Gold Exchanges or Entities Engaged in Gold Trading Platforms,” the Shanghai Gold Exchange and the Shanghai Futures Exchange are exchanges approved or consented to by the State Council to conduct gold trading. Among these, the Shanghai Gold Exchange is supervised by the People’s Bank of China, while the Shanghai Futures Exchange is supervised by the China Securities Regulatory Commission.
 
9. How should we understand “unilateral bidding,” and what are its manifestations?
 
Answer: According to Article 9 of the “Special Provisions for Spot Trading in Commodity Markets (Trial),” a one-way auction trading refers to a trading method in which a single buyer (or seller) submits a request to the market, the market announces the trading object in advance, and multiple sellers (or buyers) bid up or down prices according to prescribed rules. Once an agreement is reached within the agreed trading period, the transaction is completed. The auctions and reverse auctions commonly referred to in everyday life both fall under the category of one-way auction trading.
 
10. A certain company claims that it is a state-policy-supported enterprise and can engage in fractional trading of artworks, guaranteeing fund security and offering attractive returns. Is this trading method compliant? What risks are involved?
 
Answer: This company’s trading approach does not comply with the cleanup and rectification policies. According to Document No. 37 [2012] issued by the General Office of the State Council, any trading venue that uses its services and facilities to divide equity rights into equal shares and then sells these shares to investors—i.e., “public issuance of equal shares”—is in violation of the cleanup and rectification policies. The fractional trading of cultural and artistic assets not only contravenes national policies but also frequently involves violations such as price manipulation and arbitrary changes to rules. Moreover, there is a lack of authoritative certification regarding the authenticity and value of these artworks, leading to inflated prices, sharp price swings, and potentially serious harm to investors’ rights and interests, thus posing significant risks.
 
Eleven, does the use of “electronic bidding” by local property rights trading venues for state-owned asset transactions comply with the cleanup and rectification policies?
 
Answer: Electronic bidding refers to an electronic auction method. According to Document No. 38 [2011] issued by the State Council and Document No. 37 [2012] issued by the General Office of the State Council, as well as the relevant provisions of the "Operational Rules for Trading of State-Owned Equity in Enterprises" issued by the State-owned Assets Supervision and Administration Commission (Guozifa Quan [2009] No. 120), trading venues may conduct one-way bidding by buyers through electronic auction methods. This one-way electronic bidding approach is consistent with national policies. However, according to regulations set forth in documents issued by the State Council, it is prohibited to conduct two-way bidding—whether through electronic platforms—covering activities such as centralized bidding, continuous bidding, or electronic matching.
 
Twelve, some trading platforms offer margin trading, allowing ordinary consumers to engage in “borrowed-money trading” with significantly more funds than their initial investment by borrowing and lending. What are the risks associated with this highly leveraged trading approach?
 
Answer: Margin trading is a common trading mechanism used in many financial markets. It involves leverage, and if the margin ratio is too low, the leverage can be very high, allowing traders to achieve substantial gains with relatively small amounts of capital. However, both returns and risks are directly proportional—higher returns also mean higher risks. If ordinary investors are not fully aware of the risks associated with leveraged trading and blindly invest their entire wealth in highly leveraged positions, they could end up losing their entire principal, leaving them with nothing to show for their efforts. In extreme cases, they might even face losses exceeding their initial investment.
 
13. Currently, some cultural trading venues are conducting trading in stamps, coins, and cards using a continuous auction trading model, with a large number of individual investors participating. Is this trading method compliant? What risks are involved?
 
Answer: The practice of some cultural trading venues conducting transactions in stamps, coins, and cards using centralized trading methods such as continuous auction violates the provisions of Document No. 38 [2011] issued by the State Council and Document No. 37 [2012] issued by the General Office of the State Council. These trading venues attract a large number of individual investors, and some even engage in illegal activities such as malicious speculation and market manipulation to obtain undue profits, seriously undermining the legitimate rights and interests of investors. Once these markets experience a collapse, investors could lose their entire investment, posing significant risks.
 
14. Some trading venues conduct decentralized over-the-counter transactions and claim that these transactions are organized based on international market prices. Member firms of these trading venues quote buy and sell prices based on international prices, allowing investors to buy and then sell—or sell and then buy—on the same day. Is this practice legal? What risks are involved?
 
Answer: Currently, some trading venues take silver as their primary trading commodity. Rather than forming prices through their own transactions, these venues convert real-time foreign prices published by agencies such as Bloomberg and Reuters into RMB prices. Member firms then add or subtract a certain spread based on these converted prices to provide buy and sell quotes, enabling continuous T+0 trading with retail clients who are predominantly individual investors. All of these transactions are highly leveraged, mostly settled via reverse hedging, and virtually never involve physical delivery. The trading model employed by these venues is known as “decentralized counter trading”: the trading venue recruits members, who in turn recruit agents and intermediaries, creating a multi-layered customer acquisition network. Members essentially engage in betting against their clients. Although these venues claim to be spot trading platforms, they are in reality speculative hype platforms that offer no positive contribution to the real economy. Moreover, due to heavy losses suffered by individual clients, these venues have triggered numerous complaints and disputes, undermining social harmony and stability.
 
From a regulatory perspective, “decentralized over-the-counter trading” falls under the market-making trading method prohibited by Document No. 38 [2011] issued by the State Council. Moreover, the T+0 trading mode violates the regulation that “the time interval between an investor’s purchase and subsequent sale, or sale and subsequent purchase, of the same trading instrument must be no less than five trading days.” Participating in such trading venues poses extremely high risks. First, the “decentralized over-the-counter trading” model creates serious conflicts of interest between brokerage members and investors; driven by financial incentives, instances of infringing upon investors’ rights frequently occur. Second, these trading venues typically impose restrictions on investors’ ability to withdraw physical assets through their trading rules, encouraging frequent trading instead. This leads to sharp price fluctuations, exposing investors to substantial loss risks and imposing hefty transaction fees on them. Therefore, investors should stay far away from such illegal trading activities.
 
15. If investors suspect that a trading venue or its branch office is engaging in illegal activities such as conducting futures-like trading, manipulating market prices, misappropriating or stealing trading margins, restricting clients’ deposits and withdrawals, or “betting against” clients, where should they file a complaint or report?
 
Answer: According to Document No. 38 [2011] issued by the State Council and Document No. 37 [2012] issued by the General Office of the State Council, with the exception of trading venues established with the approval of the State Council or the financial regulatory authorities under the State Council and authorized to engage in financial product trading, all other trading venues shall be subject to daily supervision, handling of violations, and risk management by the provincial people's governments according to the principle of local jurisdiction. If investors suspect that a trading venue or its branch office is engaged in illegal or non-compliant activities, they may report their concerns to the provincial people's government where the trading venue or its branch office is registered. If they believe that such conduct constitutes a crime, they may file a criminal complaint with the public security authorities, providing relevant evidence materials.
 
16. If an investor believes that a member or agent of the trading venue has infringed upon their rights, to which entities should they lodge a complaint to protect their rights?
 
Answer: If investors believe that members or agents of a trading venue have infringed upon their rights, they may file a complaint with the provincial people’s government in the jurisdiction where the member or agent is registered, in accordance with the principle of local jurisdiction.
 
In practice, complaints against members and agents of trading venues are often closely linked to the trading venue’s own trading mechanisms, trading rules, and trading operations. To further determine whether the trading venue has engaged in illegal activities and better safeguard investors’ legitimate rights and interests, investors may also file complaints and seek redress with the provincial people’s government where the trading venue is registered. Of course, if a complaint against a member or agent is unrelated to the trading venue itself or its trading operations, investors may choose the appropriate authority to file their complaint and seek redress based on the nature of the issue.
 
If investors believe that the actions of members or agents constitute a crime, they may file a report with the public security authorities, providing relevant evidence.
 
17. Can investors apply to the China Securities Regulatory Commission or its local branches to determine whether a particular trading venue has been engaged in illegal futures trading?
 
Answer: Regarding the determination of the nature of illegal securities and futures trading activities, there are clear provisions in documents issued by the State Council. Document Guofa [2011] No. 38 stipulates that local trading venues shall be subject to daily supervision, handling of violations, and risk management under the principle of jurisdictional administration, with responsibility resting on the provincial-level people's governments. Document Guohan [2012] No. 3 further specifies that if the provincial-level people's government, public security organs, and judicial authorities have doubts about the nature of suspected illegal securities and futures trading activities conducted by a trading venue, they may submit the case to a joint conference for determination. The China Securities Regulatory Commission will then issue a formal opinion on the nature of such activities in accordance with the law, after consulting the relevant authorities.
 
To implement the provisions of the State Council’s document, clarify the division of responsibilities and work requirements within the China Securities Regulatory Commission (CSRC), ensure the quality of opinions on the determination of the nature of activities, and support competent authorities in investigating and handling illegal securities and futures activities in accordance with the law, the CSRC issued the “Notice on Doing a Good Job in Identifying Illegal Futures Trading Activities in Commodity Spot Markets” (CSRC Office Document [2013] No. 111) to all its local branches at the end of 2013.
 
The opinion on the nature of a matter issued by the China Securities Regulatory Commission (CSRC) is, in essence, professional support provided at the request of the competent authorities in their investigation and handling of illegal securities and futures activities. The opinion issued by the CSRC is intended solely for reference by the competent authorities and does not substitute for their legally mandated findings. Whether a particular transaction constitutes an illegal activity must be determined by the competent authorities through thorough investigation and verification, in accordance with the law.
 
If investors believe that a particular trading activity constitutes illegal futures trading, they should report it to the competent authorities and request them to investigate and handle the matter. This approach is conducive to resolving the issue effectively and in accordance with the law.
 
18. Some trading venues advertise that they have been approved by the provincial government and passed the acceptance inspection conducted by the joint conference. Could you clarify whether these trading venues are more reliable and whether I can feel confident enough to participate?
 
Answer: Documents Guofa [2011] No. 38 and Guobanfa [2012] No. 37 stipulate that, in accordance with the principle of jurisdictional management, the people's governments at the provincial level shall carry out centralized cleanup and rectification of various trading venues within their respective regions and shall be responsible for inspecting and accepting the implementation of rectification and standardization efforts. The Joint Conference is responsible for overall coordination of the cleanup and rectification work across provinces (autonomous regions and municipalities), but it is not responsible for the specific cleanup, rectification, or inspection and acceptance of individual trading venues.
 
Whether a trading venue is reliable fundamentally depends on whether its trading activities and rules are lawful and compliant, whether regulatory oversight is comprehensive, and whether risks are manageable—not on the approval authority. Moreover, even after undergoing centralized cleanup and rectification and passing acceptance inspections by the provincial people’s government, it only indicates that, at the time of the inspection, the trading venue was in compliance with the law. Ongoing daily supervision by the provincial people’s government remains essential. In practice, there have indeed been instances where certain trading venues, after passing cleanup and rectification inspections, have “resurfaced” and resumed engaging in illegal trading activities. When choosing a trading venue to conduct transactions, investors should carefully understand the types of trading products, trading rules, regulatory environment, and risk levels involved. They should also reasonably assess their own risk tolerance and prudently select a trading venue before participating in related trading activities.
 
19. What aspects should investors pay attention to in order to protect the safety of their funds when investing in related trading products?
 
Answer: When investors engage in transactions involving related products, the safety of their funds should be the primary consideration. To protect their own financial security, investors should: First, choose trading venues that have been legally approved and established by competent government authorities; avoid participating in transactions on “black platforms” or with “black intermediaries” that have not received approval from any regulatory body. Second, carefully review whether the trading rules and methods of the chosen venue comply with the provisions of Document No. 38 [2011] issued by the State Council and Document No. 37 [2012] issued by the General Office of the State Council—especially paying close attention to whether the venue employs trading methods such as centralized auction or market making, which are prohibited by national regulations. Third, pay close attention to the fund custody and safekeeping system. Generally speaking, in trading venues where a formal clearing institution conducts centralized clearing, funds do not pass through the trading venue itself, making the funds relatively safer. If there is no centralized clearing, at least ensure that the funds are subject to third-party bank custody and supervision (it should be noted that simply keeping funds in a bank does not suffice to guarantee their safety). If there is no third-party custody and supervision system for funds, and the trading venue’s brokerage members or the venue itself directly hold the transaction funds, investors should reasonably doubt the safety of their funds. Fourth, investors must securely safeguard the passwords for their trading and fund accounts, and never entrust these passwords to so-called investment advisors or wealth management consultants. This will help prevent unauthorized access and theft of funds, thereby ensuring their financial security. Fifth, closely monitor the status of funds in your trading account. If you discover that your funds have been defrauded or stolen, immediately report the incident or file a complaint with the public security authorities and the regulatory body overseeing the trading venue.

(Source: CSRC; Original link: http://www.csrc.gov.cn/pub/ningbo/xxfw/tzzbh/201603/t20160302_293718.htm )

Wang Shuo: An Interpretation of the “Q&A on Rectifying and Regulating Various Trading Venues”
Just after the 3.15 Consumer Rights Day this year, a news item circulating on WeChat Moments has stirred up what had otherwise been a relatively calm market. The headline, “Q&A on Rectifying and Regulating Various Trading Venues,” has drawn the attention of numerous participants in the spot market. On March 2, 2016, the CSRC’s official website published an article titled “Q&A on Rectifying and Regulating Various Trading Venues” in the Investor Protection section of the Ningbo Securities Regulatory Bureau. The language used was unusually stern. Recently, the CSRC has been posting related articles intensively on its official website, and there are also reports that the CSRC has begun conducting rectification efforts at several large trading venues. Going forward, trading venues will not only face strict oversight by their local governments but will also be subject to thorough scrutiny by the CSRC itself—this shift in attitude may well be linked to the recent appointment of the new chairman of the CSRC. On February 20, 2016, Liu Shiyu took office as chairman of the CSRC. Judging from Chairman Liu’s career background, he is undoubtedly a staunch advocate for tough measures. Given that less than a month has passed since his inauguration, choosing precisely this moment to publish such content on the CSRC’s official website cannot help but give rise to deep reflection. So let’s take a closer look, item by item, to see exactly what this document says. To correspond with the content, I’ve taken the title of each item as the heading for my analysis; I won’t be elaborating on the specific content itself. Here’s the detailed content: http://www.lutous.com/plus/view.php?aid=21419
 
I. Before participating in transactions at various local trading venues, what policies and regulations do investors need to be familiar with, and what are the main prohibitions?
 
In fact, the content of this document embodies the fundamental principles of investor suitability education, incorporating the provisions of Document No. 38 [2011] issued by the State Council and Document No. 37 [2012] issued by the General Office of the State Council. The emphasis placed on this guidance is particularly significant because this document represents the highest standard for spot trading issued by the State Council and serves as the guiding ideology for investment in commodity spot markets. I believe everyone is already familiar with its contents; we’ve already provided extensive interpretations of this section many times, so I won’t repeat them here.
 
II. Does the carbon trading initiative promoted by the National Development and Reform Commission need to comply with the cleanup and rectification policies?
 
Although Document Nos. 38 and 37 have been brought up again, the real intention behind this move is not what it seems. The content of this document is specifically aimed at those “special” trading platforms—whether dealing in carbon emissions or water resources. The reason is that today’s platforms cover an excessively broad range of business activities. According to a document issued by the State Council, certain types of platforms are explicitly excluded from regulatory oversight. To prevent these gray-area practices from emerging, all platforms potentially involved in spot trading of commodities have now been brought under regulatory scrutiny. In fact, the carbon-emissions trading model is particularly well-suited for spot trading. Each year, the state sets fixed carbon-emission quotas. Some heavily polluting enterprises may exceed their emission standards but lack channels to purchase additional allowances; meanwhile, some environmentally friendly enterprises may have unused allowances they’d like to transfer. For such specialized platforms, the state should provide appropriate support, offering enterprises reliable channels to facilitate energy conservation and emission reduction, thereby enabling them to fulfill their national environmental protection responsibilities and obligations. Unfortunately, however, these platforms lack effective profitability models and are still unable to become self-sufficient, leaving them stuck on the fringes of the industry.
 
3. Do some e-commerce companies that engage in trading of bulk commodities, precious metals, and other such products need to comply with the relevant policies for cleanup and rectification?
 
Besides exchanges and trading centers, you may have also heard of various electronic trading markets and e-commerce companies. These entities often fail to obtain approval documents from the primary regulatory authorities—the Financial Office or the Commerce Department—and cannot connect to banks’ fund settlement systems. As a result, they can only conduct fund transfers via third-party payment platforms, thereby participating in transactions. Such companies carry extremely high risks, and the rights and interests of participants are not adequately protected. Therefore, everyone should approach these entities with caution. That said, it’s important to note that not all such platforms operate this way. Before 2010, many platforms indeed emerged as trading markets—for example, the Guangxi Sugar Network, officially known as the Guangxi Sugar Network Sugar Wholesale Market, and the Zhangjiagang Chemical Electronic Trading Market. These platforms are legitimate and legal bulk commodity trading platforms. It’s crucial to treat them differently and always choose reputable, official platforms when engaging in trading activities.
 
4. Does the online marketplace’s transaction business need to comply with the relevant policies for cleanup and rectification?
 
Although the subsequent references to Documents No. 38 and No. 37 do mention these issues, the content actually affirms the procurement and sales models for physical commodities and reflects the regulatory authorities’ vision for the development of the spot market—namely, to ground operations in the spot market, serve the spot market, and enhance the spot market’s capabilities by embracing digital trading. As a result, many platforms have introduced new features based on their existing models, such as spot product listings, spot auctions, and online marketplaces. However, since these models involve numerous links—including spot delivery, inspection, warehousing, and logistics—and require significant time, manpower, and resources, they are not yet mainstream trading models on most platforms, and in fact, are rarely explicitly mentioned. If a platform aims for longer-term growth, it might well invest more effort into developing these types of models. After all, with the support of the national government, even Mom won’t have to worry about me running into trouble on March 15th anymore!
 
V. What are the responsibilities of the Inter-Ministerial Joint Conference on Rectifying and Regulating Various Trading Venues? And what is the role of the China Securities Regulatory Commission within this framework?
 
6. What are the admission procedures for various trading venues during their establishment phase? And who oversees their daily operations?
 
Articles 5 and 6 are combined into one because they address the same content. The inter-ministerial joint conference system for rectifying and regulating various trading venues serves as a supervisory and guiding body but does not directly manage commodity trading platforms—this is precisely what I have mentioned repeatedly before. As explained in “A Comprehensive Analysis of the Commodity Trading Market in 2016,” this point has already been clarified, so I will not repeat it here.
 
7. Which trading venues are regulated by the China Securities Regulatory Commission?
 
Article 7: The practical aspect is actually quite interesting. After introducing so much content about the spot markets for bulk commodities, and then emphasizing the scope of regulatory functions of the CSRC, we’re implicitly pointing out that the CSRC is not the supervisory and administrative authority for the spot markets of bulk commodities. Instead, the inter-ministerial joint conference on rectifying and regulating various trading venues, as well as the financial offices and commerce departments of each province, are actually responsible for this task—everyone should understand what this means.
 
8. What are the venues where gold trading can be conducted? Who manages these venues?
 
To reiterate, gold is a special commodity. Apart from the Shanghai Gold Exchange and the Shanghai Futures Exchange—both of which have been approved or consented to by the State Council to conduct gold trading—other platforms are strictly prohibited from engaging in such activities.
 
9. How should we understand single-sided bidding, and what are its manifestations?
 
Definition of the term: In fact, this refers to the second item mentioned in Document Nos. 38 and 37 referred to in Article 1—namely, that trading shall not be conducted through centralized trading methods. Centralized trading methods include such approaches as call auctions, continuous auction, electronic matching, anonymous trading, and market making; however, negotiated transfers and auctions conducted in accordance with the law are excluded from this definition.
 
10. A certain company claims that it is a state-policy-supported enterprise and can engage in fractional trading of artworks, guaranteeing fund security and offering attractive returns. Is this trading method compliant? What risks are involved?
 
To reiterate once again, fractional trading of artworks is a trading practice explicitly prohibited by the state. Instead of fractionalization, it should simply involve one-to-one physical assets.
 
11. Does the use of electronic bidding by local property rights trading venues to conduct state-owned asset transactions comply with the cleanup and rectification policies?
 
For property-rights-based platforms, it’s important to emphasize that they must also comply with the contents of Documents No. 38 and No. 37, which could deal a blow to platforms that skirt the rules.
 
Twelve, some trading platforms offer margin trading, allowing ordinary consumers to engage in trading with borrowed funds—leveraging their small initial investment by borrowing additional money through lending. What are the risks associated with this highly leveraged trading approach?
 
It’s important to clarify here that margin trading and lending are two distinct models: one serves as a guarantee for fulfilling contractual obligations, while the other is a form of leveraged financing. Since 2015, the Chinese government has been cracking down on off-exchange leveraged financing practices. Leverage has always been a paradoxical unity—profits and risks are directly proportional. The greater the leverage, the higher the potential profits, but this also comes with correspondingly higher risks. Proper use of leverage can help reduce costs and enhance liquidity. However, leveraging also requires a comprehensive risk management system and strong capital management capabilities in order to effectively control risks. Going forward, we hope that trading platforms will introduce more flexible leverage-management options, allowing traders to choose leverage levels that best suit their individual risk tolerance.
 
13. Currently, some cultural trading venues are conducting trading in stamps, coins, and cards using a continuous auction trading model, with a large number of individual investors participating. Is this trading method compliant? What risks are involved?
 
As the most popular trading category at present, cultural-related transactions also carry substantial risks. From a professional standpoint, the CSRC should step in to cool down this hot trend. We hope investors will participate in market investments with rationality and prudence, avoiding excessive speculation.
 
14. Some trading venues conduct decentralized over-the-counter transactions and claim that these transactions are organized based on international market prices. Member firms of these trading venues quote buy and sell prices based on international prices, allowing investors to buy and then sell—or sell and then buy—on the same day. Is this practice legal? What risks are involved?
 
This section, which serves as the focal point of all the content and is described as the most attention-grabbing element, explicitly states that decentralized over-the-counter trading does not comply with national regulations. However, its interpretation is remarkably straightforward: it emphasizes local jurisdiction—that is, compliance and stability can be ensured only if the relevant management measures issued by the local authorities are supportive. Therefore, the statement concludes with “Investors should stay away from such non-compliant transactions” rather than outright prohibiting this trading model.
 
15. If investors suspect that a trading venue or its branch office is engaging in illegal activities such as conducting futures-like trading, manipulating market prices, misappropriating or stealing trading margins, restricting clients’ deposit and withdrawal activities, or placing bets against their clients, where should they file a complaint or report?
 
16. If an investor believes that a member or agent of the trading venue has infringed upon their rights, to which entities should they lodge a complaint to protect their rights?
 
17. Can investors apply to the China Securities Regulatory Commission or its local branches to determine whether a particular trading venue has been engaged in illegal futures trading?
 
Articles 15, 16, and 17, taken together, emphasize the principle of local jurisdiction while also stressing the importance of opening up communication channels, safeguarding the legitimate rights of traders, issuing warnings against illegal platforms, and reminding traders to choose legal and compliant trading platforms for their transactions.
 
18. Some trading venues advertise that they have been approved by the provincial government and passed the acceptance inspection conducted by the joint conference. Could you clarify whether these trading venues are more reliable and whether I can feel confident enough to participate?
 
“According to the principle of jurisdictional management, each provincial people’s government shall carry out centralized cleanup and rectification of all types of trading venues within its jurisdiction and shall be responsible for inspecting and accepting the compliance and standardization efforts. The joint conference is tasked with coordinating and overseeing the cleanup and rectification work across provinces (autonomous regions and municipalities), but it is not responsible for the actual cleanup, rectification, or inspection and acceptance of specific trading venues.” This clearly defines the functional scope of each department. When choosing a platform, traders should select only those that have been approved and accepted by the provincial government. However, traders must also carefully understand the various risks that may arise during trading. It is emphasized that traders bear corresponding responsibilities as well: they must fully read and comprehend all rules and risk-mitigation measures of the trading platform, be aware of the risks associated with investment and the risks inherent in electronic trading, and refrain from remaining silent when making profits while loudly demanding compensation upon incurring losses.
 
19. What aspects should investors pay attention to in order to protect the safety of their funds when investing in related trading products?
 
In addition to reminding investors to protect their legitimate rights and interests and to invest rationally, we also urge trading platforms to establish comprehensive systems for trading, risk control, and fund management. With investor suitability management at the core, these platforms must earnestly carry out investor education and protection efforts, providing investors with a legal, compliant, and stable trading environment.