China State Media Calls for Regulation Over Quantitative Trading

By  Bloomberg Jeanny Yu 7 September 2021, 11:40 am HKT

Quantitative trading is growing rapidly in China’s stock market and the authorities should develop a regulatory regime that “best suits” the country, according to a commentary carried by the state-run Securities Times.

Trading volume in the A-share market has been soaring this year, with quantitative trading becoming a force that “can’t be overlooked,” according to the article. Chinese regulators need to step up research into the strategy and provide more relevant data for investors, it added.

Total daily turnover on Chinese main boards has been above 1 trillion yuan ($155 billion) for more than a month and jumped to the highest level in more than a year on Sept. 1, Bloomberg-compiled data show. 

The “highly liquid” mainland stock market provides “fertile soil” for high-frequency trading, with its turnover velocity — namely turnover over market value — being one of the highest globally, according to a report by the Institute of International Finance in April.

While the quantitative strategy can help improve the market’s price discovery function and boost liquidity, it could also significantly amplify volatility when stock swings break the thresholds of its trading models, the commentary said. 

High-frequency trading is aided by fast communication speed, which can put average investors at a disadvantage, it said.

— With assistance by Sofia Horta e Costa