CHINA'S central bank has ordered all interbank bond trading to be done through the National Interbank Funding Center as part of a plan to clean up the market.

Clearing agencies should not settle trades outside the interbank market and transactions, including forward deals and repurchases, can't be reversed or changed once agreed between two parties, the People's Bank of China said in a statement posted on its website yesterday.

Changes to bond ownership through inheritance, donation and mortgage must be backed by legal documents to explain the nature of the transaction, the PBOC said.

The new rule effectively bans traders to arrange deals personally and would prevent price manipulation, market participants said.

"The rules will make bond trade more transparent but also more difficult," a Shanghai-based trader said. "They also result in errors being costly because deals cannot be revised."

The new rules also ban market participants handling wealth management accounts from trading bonds.

China has issued several regulations to tighten the trading and issuance of bonds since May as part of efforts to lift the efficient use of funds by encouraging companies to raise money through bonds.