A certain type of equity leverage financing with a name hardly heard before has been banned by the China Securities Regulatory Commission, which seems to be pouring cold water on the Chinese stock market boom.

The CSRC has been admonishing investors more and more severely about the boom and has been using its rulebook to restrict margin lending. Simultaneously, the two main stock exchanges in mainland China, in Shanghai and Shenzhen, are saying that they are going to make it easier to bet against shares.

Barrons explains that umbrella trusts operate in a way similar to collateralized debt obligations or CDOs, with the equity investor taking first risk and other investors a fixed return with credit protection from the equity tranche.

It continues: "They give a leverage ratio of 3:1, higher than the 2:1 ratio in traditional margin financing. But in return, they also have a much higher entry requirement. Clients need to put in at least 1 million to 10 million yuan assets (depending on the trust), compared with half a million in margin financing. As a result, umbrella trusts are much smaller.

Wealth-management products, known as WMPs, have been used to channel 300 billion yuan ($48 billion) to 500 billion yuan into shares, according to an estimate that Goldman Sachs released on 19 January.