China’s WeChat weighs banker-friendly messaging

Service aimed at letting global bankers do bond trades without compliance breach

Tencent-backed WeChat is in talks about developing a messaging service aimed at allowing international bankers to discuss bond trades with China-based bankers without breaching compliance rules that were implemented in the wake of a series of high-profile rate-rigging scandals. Many bankers in China trade bonds in WeChat message groups, where they agree on prices before executing trades and then registering them with the Chinese central bank’s trading system, according to people briefed on the process. But international bankers are unable to participate because of strict internal compliance systems that bar such opaque and unregulated trading. The Asia Securities Industry & Financial Markets Association, a Hong Kong-based industry body that represents banks and asset managers, told the Financial Times that it had held talks with WeChat about developing a version of its messaging service that would enable international bankers in Hong Kong to engage with China-based peers without breaking compliance rules. One idea would be to allow banks’ compliance departments or a third party to monitor work-related conversations, one person involved in the talks said. It is not clear whether WeChat would create a new version of its messaging service, or adapt its existing WeChat enterprise messaging scheme, which is aimed at the workplace. WeChat and owner Tencent did not immediately respond to requests for comment. One person close to the talks said: “I think WeChat and WhatsApp will come out with these things so banks cannot so much trade, but deal with people onshore in China.” Global bankers are increasingly concerned they are excluded from deals involving some of the most-traded bonds and the best pricing. “I think you’ll see that in the next year, WeChat [and] WhatsApp will start offering these services,” said the person. Trading over messaging services such as WeChat was common in China, analysts said. “Traders set up these groups after meeting each other, for example at conferences, and exchange information about the trades they want to make,” said Zhang Yingchao, financial analyst at investment bank Everbright SHK in Beijing. “If you’re not able to take part in these groups, then your channels of information are less, and in finance information is a vital resource,” Ms Zhang added. Mobile messaging services such as WhatsApp, owned by Facebook, and WeChat are encrypted so that the conversations remain private — hampering efforts by banks’ compliance teams to monitor traders. Mark Austen, chief executive of Asifma, said: “As Chinese fixed-income markets mature, more needs to be done to shift trading on chat rooms to electronic trading venues, to ensure better transparency for all participants and avoid Libor-like scandals.” International banks clamped down on traders’ use of chat rooms after a series of high-profile scandals following the financial crisis, where bankers infamously used online chat sites to manipulate financial markets. Several large investment banks including Deutsche Bank have banned the use of messaging services on work-issued phones. Last year, a banker at Jefferies was fined by the UK’s Financial Conduct Authority for sharing confidential client information over WhatsApp. In Hong Kong, regulators are beginning to restrict the use of messaging services for trading. This month, the Securities and Futures Commission issued guidance on brokers using instant messaging when receiving trade orders from clients. It directed companies to take “adequate measures” to “ensure compliance with the requirements, which include keeping proper records of messages relating to client orders”.