(Yicai Global) May 6 -- The China Securities Regulatory Commission has brought in software to monitor margin financing to crack down on illegal activities, a source recently told Yicai Global.

CSRC will infer whether an account is used for asset allocation based on artificial intelligence, algorithms, computing power and data with this program.

Margin trading is the use of funds borrowed from to trade financial instruments, which are themselves the collateral for the loan. The CSRC has been severely cracking down on such unregulated financing activity since it increases market risks.

Various CSRC branch offices have started to use the technology, with brokerages also to be required to access the system, the source said.

The regulator can reverse an intermediary trading process and end a trading relationship as long as the result data and the initial data are available since a lot of trading activity on such accounts is similar, the source said.

Some large brokers have adopted the system, with many issues already coming to light in only several months of operation. The problems the system has unearthed have considerably burdened the workload of local securities regulators, the source added.

Editor: Ben Armour