CITADEL LLC, a U.S.-based hedge fund, confirmed that trading in one of the accounts it manages in China has been restricted by China’s securities regulator, a company representative said yesterday.

    “Citadel has been actively investing in the region for 15 years, and has always maintained a constructive dialog with regulators, including during the recent market volatility,” a company statement said.

    “We can confirm that while one account managed by Guosen Futures Ltd. — Citadel (Shanghai) Trading Ltd. — has had its trading on the Shenzhen Stock Exchange suspended, we continue to otherwise operate normally from our offices, and we continue to comply with all local laws and regulations.”

    Citadel is not the only foreign institution that has been working in China and some industry insiders think other foreign fund management companies, in particular hedge funds, could be in regulators’ crosshairs.

    “A lot of the quant shops overseas have been really aggressive in setting up short positions,” said one fund management executive at a foreign investment advisory in Shanghai who spoke on condition of anonymity.

    “I think these are at risk, I definitely do,” he added.

    China’s securities regulator said Friday it has launched a probe into automated trading and has restricted 24 stock accounts suspected of influencing stock prices, including abnormal bids for shares and bid cancelations that might have impacted wider market performance.

    The government didn’t name any of the parties behind the restricted stock accounts. The regulator indicated it was particularly concerned over automated trading strategies.

    China’s market collapsed after a steep rally earlier this year fueled with borrowed money. The government’s effort to stem the slide includes big purchases of stock by State-controlled companies. But it also involves scrutiny of individual traders and stock trading accounts.

    Last week, the securities regulator said the listed arm of State-owned airplane maker Aviation Industry Corp. of China and two of its shareholders may have violated stock selling rules. The unit said it would cooperate.

    Citadel, one of the world’s largest hedge funds with about US$26 billion under management, has made it a priority to ramp up investing in China.

    (SD-Agencies)