Demystifying the Hong Kong Gold and Silver Trade Fair

Those rumors about the Hong Kong platform

Observation found that behind this phenomenon, there is a name frequently mentioned, that is, the Hong Kong Gold and Silver Exchange Society (subsequently referred to as CGSE).

Many readers actually do not know much about the nature and background of this institution, whether directly treating CGSE as the “cradle of black platforms” or as a “senior foreign exchange regulatory license”, is not a proper way of thinking.

How to properly view the Hong Kong platform? The first step is to get to know the Hong Kong Gold and Silver Exchange Society.

What is the origin of the Hong Kong Gold and Silver Exchange Society (CGSE)?

Truth be told, in recent years, platforms with a Hong Kong background have indeed been making demons of themselves, many of which are using the name of CGSE bankers to endorse themselves.

With the increasing number of platforms plunging into mines, CGSE’s reputation and credibility among Chinese traders has been greatly damaged.

However, objectively speaking, CGSE is not an illegal and shady institution. On the contrary, as advertised by those platforms, the Hong Kong Gold and Silver Exchange is indeed the only physical gold and silver exchange recognized by the Hong Kong SAR government.

CGSE was established in 1910, founded by Chinese banks Hang Seng Bank and Dah Sing Bank and other giants, and is currently the only institution recognized by the Hong Kong SAR government to operate the spot commodities market.
CGSE classifies its dealers into AA, A1, A2, B, C, D, S and QH categories. Only AA and A1 category dealers support spot gold/silver (also known as London Bullion) trading.
Each transaction made through a CGSE-approved electronic dealer is given a transaction code, which can be used to check the order details on the CGSE website.

The root cause of so many problems is that some brokers deliberately exaggerate the gold content of the CGSE practitioner qualification in their promotions; traders are also easily confused between the CGSE practitioner qualification and other countries’ official forex regulatory licenses because they do not understand the details of the CGSE regulation.

We have selected a few points that are most likely to be confused, and we will talk about them below.

CGSE is only a trade association with the right to operate under an exemption, and is not a government regulator.

CGSE is exempted from operating an exchange under section 3d of Chapter 82 of the Laws of Hong Kong. In other words, the actual nature of the CGSE is more akin to a *** trade association than a *** regulatory authority, and the CGSE does not have any legally binding regulatory authority over the conduct of its members.

Currently, the Hong Kong commodities spot market is all about self-regulation.

To know why we look at the regulatory license when choosing a platform, one is to hope that in the event of trading friction and disputes, there will be an impartial judge for us, the vulnerable party; the second is to expect the regulator to raise the entry threshold of the industry through various qualification audits, monitor the daily operation of the platform through regular reports and other forms, and make timely warnings and management.

However, as a **industry association, CGSE has no authority to require platforms to make regular reports on their operating conditions, let alone to impose any legally effective administrative penalties for violations. When traders give feedback to the CGSE, the CGSE can only advise the platform, or use internal disciplinary measures, “London gold” related disputes must involve fraud and blackmail, the police can intervene to investigate.

This is why so many platforms dare to forge a name for themselves as “bankers” to implement fraudulent behavior. Because even if they are aware of these acts, the CGSE simply can not control, at most issued a “solemn statement” announcement.

This has led to a mixed bag of Hong Kong platforms, and it is difficult for a newcomer to distinguish who is a real “member” and who is a packaged “impostor”, making it very easy to fall for the scam.

CGSE is allowing the existence of a B-Book model, where the platform can bet against the user.

As we said above, any order traded through CGSE bankers has a transaction number, and it is easy to find the location of the transaction code search on the official website of the Trade House.

However, this transaction number does not guarantee that the user’s order will be submitted to the electronic trading platform of the Trading House. In fact, the platform itself acts as a counterparty to hedge the user’s order and then seeks registration with the Trading House so that the trade number can also be provided.

When a user places an order, the CGSE dealer can choose to hedge it himself and trade directly with the customer, or submit the customer’s trade to the electronic trading platform to trade with other dealers, both of which are available to obtain a trade code by registering with the Trade Yard’s electronic trading platform.

In short, the customer and the dealer is not only a counterparty relationship, but also a direct interest-related betting relationship. It is important to know that under the B-Book model, traders can do a lot of things.

See this, if you are still struggling whether self-regulation is effective, or can effectively protect your account? You don’t have to. Because the foreign exchange and commodity derivatives you trade are simply not related to the trading floor. Everyone, please continue to read on.

The most important point! CGSE’s business scope only involves commodities spot.

Now more and more Gold and Silver Exchange background of the platform began to carry out foreign exchange business, but in fact the Hong Kong commodities derivatives market is operated by the Hong Kong Futures Exchange, foreign exchange margin business by the Hong Kong Securities and Futures Commission SFC supervision.
The top of a “CGSE banker” identity to carry out foreign exchange brokerage business, which is what means it is self-explanatory.

Therefore, we encounter only the CGSE member qualification, but claim to support the trading of foreign exchange, directly into the black platform list. Moreover, encounter non-AA and A1 class members, but also said they comply with the operation of London bullion trading, but also most of the unreliable platform, can also be directly skipped.

A brief summary, the Hong Kong Gold and Silver Exchange Society does not regulate the spot gold trading contracts, does not regulate foreign exchange brokerage business, self-regulation of commodity spot (London gold / silver, etc.).

London gold scams that were “all the rage”

In recent years, there have been more and more fraudulent platforms under the banner of CGSE, and the experiences shared by those victims have become the biggest black material of the trade. 2018~2019 are the two most rampant years of the “London Gold Scam”.

In 2018, some Hong Kong media estimated that in the six months of 2018 alone, more than 30,000 people across China were defrauded of their investments in nine London gold companies in Hong Kong, with each person being defrauded of between 100,000 and more than 10 million yuan, totaling 8.25 billion yuan (nearly HK$10 billion).

In the same year, the Hong Kong police carried out “Operation Windbreak”, including a major attack on the mainland London gold fraud group, involving platforms such as Hao Tian Finance, Tianyu Holdings, the case arrested more than 30 people, freezing tens of millions of dollars in deposits.

In early 2019, Hong Kong police uncovered one of the largest ever “London gold” trading scams, in which an 85-year-old man was cheated out of HK$580 million (about 499 million yuan) in two years.

In the same year, Hanchuan City, Hubei Province prosecutors heard a “London gold scam” involving up to 366 people, 366 people on the network platform to speculate in “London gold” was 26.44 million yuan, while the operating group set up the scam but profit from 2.28 million yuan, its subordinates an agent group also profit 280,000 yuan, involving the platform Hong Kong Trump Gold Limited and its agents.

CGSE has no regulatory authority and naturally has no right to impose administrative penalties. These victims go all the way to Hong Kong to seek justice from the CGSE, it is better to keep the evidence and report to the police directly.

Here we share with you a very classic case of rights protection (from the Hong Kong Commercial Daily’s report).

In 2017, Xi’an Ms. Yang broke the news to Hong Kong Business News that she was scammed by an agent for 300,000 RMB in 20 days. She was actively persuaded by an agent of a Hong Kong financial company to start speculating with London gold, but lost 300,000 RMB in 20 days.
After the incident, the agent who was originally saddled with active service stopped paying attention to Ms. Yang.
The person in charge of the Hong Kong gold investment company said: can not disclose the agent information, the company also has no responsibility for the mainland agents. The company said it could only refund part of the agent’s commission of US$4,000 as compensation, and out of sympathy for the customer’s experience, the company will compensate the customer an additional US$3,000, a total of US$7,000.
For its part, the bullion exchange replied: they ignore the dispute between the banker’s unit and the client. The Hong Kong police said that they could not open a case without documentary evidence (here again, the importance of keeping evidence).

Ms. Yang’s subsequent experience in defending her rights is really saddening, and those readers who had expected the bullion market to do something about it are not disappointed. In fact, this is not an isolated case.

Over the years, in the face of complaints from mainland traders, the Chinese Gold and Silver Exchange Society has made a number of statements. I read around and can only say that these platitudes have no real meaning and even have the suspicion of dumping the victim.

Concluding remarks

Are all Hong Kong platforms scam?

No, this simple geographic black statement here will not say much, but only CGSE firm member qualification but carry out foreign exchange brokerage business, can be directly seen as a black platform.
Hong Kong law does not require gold traders to join the bullion market as a member before they can do spot gold trading, which means that there will be unregulated over-the-counter trading in the Hong Kong gold market, therefore, the strict selection of the Jun also does not recommend trading London gold and silver in non-CGSE member platforms.

Is it reliable to trade London gold and silver through CGSE approved dealers or their mainland agents?

First of all, I would like to state my position that I do not recommend trading on a purely Hong Kong-based platform, whether he is a member of the CGSE or not.
The reason is simple: the Hong Kong spot market for commodities is only subject to self-regulation, CGSE can not implement strong supervision of its members, the trading mechanism allows betting. Overall, the transaction is risky.
Not to mention the agents, many historical cases show that Hong Kong subjects will not be held responsible for the illegal actions of their agents.

What should I do if I have been cheated on a Hong Kong platform?

Keep evidence and seek the police. To add, no matter what platform you are trading on, it is important to keep all kinds of evidence on a daily basis for insurance purposes.