Homemade Foreign Trading

Using cross-border holding data from all custodians in China's Stock Connect, we provide evidence that Chinese mainland insiders evade see-through surveillance by round-tripping via the program.Following the 2018 Northbound Investor Identification reform, the return predictability of northbound flows decays, as does their correlation with insider trading.This reduction is especially pronounced among less prestigious foreign custodians and cross-operating mainland custodians, where insiders are more likely to hide.Furthermore, the reform erodes price informativeness, particularly in stocks with high exposure to homemade foreign investors.Our analysis highlights the role of regulatory cooperation in capital market integration.