China’s stock exchanges to regulate programme trading (HFT)

October 9, 2015

PerformanceGurus Staff

Beijing

[dropcap color=”#008040″ boxed=”no” boxed_radius=”8px” class=”” id=””]C[/dropcap]hina’s two stock exchanges in Shanghai and Shenzhen have released draft regulations on programme trading. The regulator has previously said programme trading(also known as computerized trading or High Frequency Trading), a computerised automated trading scheme used by investors to trade large quantities of shares, can sometimes be abused to bring more volatility to the market and contributed to the recent collapse of Chinese stocks, Xinhua news agency reported.

The rules cover applications, net buying quotas, trading behaviour supervision and risk control. Brokers and futures firms may be held responsible for risks associated with their clients programme trading activities. The Shanghai Stock Exchange will intervene should automated trading strategies bring chaos to the markets. The intervention could go from limiting trading on certain accounts to temporarily shutting down the market.

Shanghai also plans to impose a fee on frequent order withdrawals but said the fee will not apply to normal trading and could be reduced or waived for market makers for certain securities, and for liquidity providers.

It maybe noted that one the largest HFT firms in the world, The Citadel Group has been barred from trading in China.

Note:
1. Some of the content is used from IANS.
2. Text in Bold points to additional data on the topic.