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Finance Glossary

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Chinese Wall

Definition:

Ironically this concept was named after the Chinese icon, The Great Wall, because it was perceived to be impenetrable. The Chinese Wall is supposed to represent the highest of ethics and securities regulatory respect so that an investment bank's traders are fully walled off from its M&A and other finance people. The latter regularly have access to inside information and are almost always totally prohibited from trading to take advantage of their knowledge. The bank's traders, however, are trying to trade "smarter than the market" - it's their job to go make profits. The Chinese Wall is supposed to be the barrier so that the two sides don't leak information. At the risk of understatement, it doesn't always work out that way.

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