Regulators to Increase Oversight that Extends Campaign to Stabilize Equity Market
Chinese regulators are planning to increase its oversight of algorithmic traders that will extended a campaign that will stabilize the equity market in which some analysts are blaming for the shrinking volumes and a retreat by foreign investors. Based on the drafted rules that was released by China’s securities regulator, that traders using automated orders to buy and sell stocks will now report certain information and wait for a review before allowed to executed their strategies.
The orders must not originates from offshore computers or domestic systems that are remotely controlled overseas and based on the proposal by the China Securities Regulatory Commission is the plan to crackdown on these strategies that are blamed by authorities for getting US$ 5 trillion stock market rout. Volumes in the equity index futures collapsed amid government curbs on trading as turnover in cash equities dropped to a year low in September. Another proposal from the commission stated that algorithmic trades would further weigh on volumes. Algo traders have a small time window to do their strategy and they can’t do anything until approvals are given or if approvals take too long.
China froze around 30 trading accounts that were suspected for fueling volatility by using automated trading strategies and price swings on the Shanghai Composite Index eased from their peak in August after a ten day volatility that plunged more than half as turnover dried up. Program trading is focused on money making by using arbitrage opportunities and its impact in destabilizing the market during the rout. The new policy will rectify that and algorithmic trading is double edged and needs to strictly managed and limited.