Quantitative trading, or quant trading, is a focus of attention whenever the A-share market experiences volatility and this time is no exception. We observe a regulatory response this time is to conduct communication with retail investors on the basis of previous market research and information collection in this regard. According to media reports, on July 25, 2026, the Committee on Private Securities Investment Fund under the Asset Management Association of China (the Committee) accepted an interview by a journalist of Yicai Global, in response to market calls for the regulation of quant trading.
Our Observations
According to the China Securities Regulatory Commission (CSRC) website, a number of the investor representatives attending the investor roundtable chaired by CSRC governor on July 20 raised a few suggestions, one of which was that quant trading and AI applications should be developed in a more regulated manner. Similar calls for the further regulation of quant trading were also made by participants in subsequent meetings convened by the CSRC with listed companies, market participants and academic experts. This interview of the Committee may be viewed as an indirect response by the CSRC, through the Committee, to the concerns of retail investors (“the Response”). The Response addresses the fairness of quant trading, its market volume and impact, the trading rules and the regulatory measures. It therefore deserves attention from both domestic and international quant trading firms.
I.The Fairness of Quant Trading
Regarding the T+1 trading mechanism, some investors have argued that quant traders conduct T+0 trading while retail investors are restricted to T+1 trading mechanism. The Response clarifies that the exchanges’ current trading rules apply equally to all types of investors. In the stock market, all investors, including quant traders, may only trade on a T+1 basis and are not able to engage in T+0 trading. Since 2024, regulators have imposed restrictions on the use of securities borrowing and lending (SBL) for disguised T+0 trading. The Response also clarifies that some investors who already held a stock on T-1 may achieve so-called “T+0 trading” by purchasing the same stock on T and selling the shares acquired on T-1. This is a permissible trading arrangement available to all investors, but it does not constitute T+0 trading per se.
Our Observations
The Response clarifies that the current trading mechanisms do not unfairly treat retail investors.
In response to retail investors’ sense of unfairness and their perception of being exploited in light of the relatively strong returns generated by quant trading in recent years, the Response clarifies that such returns are primarily attributable to quant traders’ advantages in information and technology, rather than any difference in trading rules or regulatory treatment.
Our Observations
On this point, the Response does not deny that quant trading has informational and technological advantages.
The Response emphasizes that, given the high proportion of retail investors in the A-share market, regulators have actively sought in recent years to regulate quant trading, to promote market fairness and orderly development. Measures include enhanced trading supervision and introducing monitoring thresholds for abnormal program trading in stocks, which are intended to set regulatory bottom lines and encourage lower trading frequencies and slower order-submission rates.
Since the beginning of this year, regulators have also sought to reduce the speed advantages of quant trading through measures relating to co-location and trading-unit or gateway management. For example, the exchanges have required brokers to stop providing dedicated trading gateways and exclusive channels to single clients, and to relocate clients’ co-located servers out of exchange data centers.
The Response specifically cites the current high frequency trading thresholds in A-share market: a maximum of 300 or more order submissions and cancellations per account per second, or a maximum of 20,000 or more order submissions and cancellations per account for the entire trading day. It also clarifies market rumors regarding the restrictions on high frequency trading in the United States.
Our Observations
This section of the Response seeks to demonstrate that regulators have already taken steps to address these concerns, including the setting up of monitoring thresholds and requiring the relocation of hosted servers to weaken quant traders’ speed advantages. According to media reports, regulators have asked brokers to move client servers out of exchange data centers since December last year, with the aim of curbing the speed advantage enjoyed by quant traders.
The Shanghai Stock Exchange, the Shenzhen Stock Exchange and the Beijing Stock Exchange have also issued the Guidelines on the Administration of Trading Gateways (Trial) and the Notice on Strengthening the Management of Exchange Participants’ Trading Units, which requires brokers to allocate trading gateways fairly and strictly prohibit preferential treatment for any single investor.
Pursuant to the Administrative Rules for Program Trading in the Securities Market (Trial) and the exchanges’ Detailed Implementation Rules for the Management of Program Trading (the Implementation Rules), abnormal instantaneous order submission rates, frequent instantaneous order cancellations, frequent lifting or suppressing and large-volume order executions within a short period of time are treated as abnormal program trading behavior that may affect exchange system security or market order.
II.The Role of Quant Trading in Recent Market Volatility
The Response also addresses questions of whether quant traders had engaged in concentrated selling or short selling during the market decline since July. It states that, based on the information collected from leading brokers and quant fund managers, many quant trading firms were net buyers, rather than net sellers, on trading days when the market declined more sharply. Some quant trading firms even made substantial net purchases, and there was no concentrated sell-off.
Main quant products, including index enhancement, quant long-only and market-neutral strategies, generally operate at full or near-full positions, switching among different single stocks. A concentrated sell-off over a short period of time would not increase returns but could instead result in losses, so quant trading firms have no incentive to initiate such trading.
The Response also states that due to policy restrictions, quant fund managers cannot use SBL or stock index futures to suppress the market. In case of extreme market conditions, regulatory authority will implement enhanced close monitoring. The three main stock exchanges have established monitoring thresholds for large-volume transactions within a short period of time. Where such thresholds are triggered, the exchanges may promptly impose self-regulatory measures.
Our Observations
In the media Q&A published by the CSRC in February 2024, it was announced that the further expansion of securities refinancing would be suspended and existing positions would be gradually wound down. Brokers were also prohibited from providing SBL services to investors using borrowed securities for intraday reverse trading (or disguised T+0 trading), thereby constraining related arbitrage activity through both restrictions on the supply of securities for SBL and the related trading conducts. In July 2024, the CSRC approved the suspension of new securities refinancing and increased the minimum margin ratio applicable to private securities investment funds participating in SBL business, from 100% to 120%.
Under the Implementation Rules, the exchanges may adjust monitoring thresholds as needed for self-regulatory purposes. Even if the trading behavior of program trading investors does not reach the monitoring thresholds but is close to the thresholds and involves multiple instances of the same trading behavior, the exchange may still classify it as the corresponding type of abnormal trading behavior or order securities brokers to impose close monitoring.
This part of the Response primarily addresses the allegations against quant trading. It also implies that in abnormal market conditions, regulators may come under greater pressure to adjust monitoring thresholds, such as those for large-volume order executions within a short period of time, and to take prompt action against trading behaviors that trigger those monitoring thresholds.
III.Guidance for Retail Investors Against the Rapid Development of Quant Trading
The Response notes the accelerated development of quant trading supported by AI technology. It encourages retail investors to focus more on the long-term growth of companies in seeking stable returns, while leveraging professional institutions’ expertise to scientifically allocate capital in professional products. The Response also notes that quant trading may contribute to market liquidity and help moderate volatility, and index enhancement or discretionary quant stock-selection products typically maintain relatively high positions.
Our Observations
This section elaborates on the potential positive contribution of quant trading to the market and may also be viewed as a defense of quant trading from the perspective of retail investors. Nevertheless, we believe that quant trading may still face scrutiny whenever market volatility intensifies.
IV.Regulatory Enforcement Against Individual Cases of Market Manipulation
In this section, the Response discusses exchange monitoring thresholds, the features of quant trading and individual enforcement cases.
Firstly, in response to concerns that quant traders may mislead retail investors through frequent order placements and cancellations, the Response clarifies that the securities exchanges have established specific abnormal program trading monitoring criteria, including limits on order submission and cancellation rates.
Secondly, the Response further states that quant trading in the A-share market is generally highly diversified, often involving thousands of individual stocks, with relatively small trading amounts, order counts and individual order sizes per stock. Frequent order submission and cancellation, as well as reverse trading, are not common practice in A-share quant trading.
In May 2025, the CSRC imposed a fine of RMB 400 million on an individual investor, Peng, for using program trading tools to manipulate stock prices through false order submissions, intraday price lifting, the locking of stocks at their daily price limit, and other means. Regulatory authority has also launched targeted enforcement actions against several illegal stock-recommendation cases marketed under the label of ‘quant investment’.
Our Observations
The Response specifically refers to certainly typical cases of market manipulation involving frequent order submission and cancellation or reverse trading, but it clarifies that reverse trading is not a common practice of quant trading in the A-share market, given the relatively small trading amounts, order counts and individual order sizes in a single stock. We understand that regulatory authority is expected to continue investigating and penalizing individual cases of market manipulation; however, this should not be interpreted as an overall rejection of quant trading.
General Observations
We believe this Response represents informal regulatory communication through a specialized committee established under an industry self-regulatory organization. Although it is not a formal regulatory document, it may indicate the regulatory direction of quant trading.
We anticipate that the subsequent actions by the CSRC will proceed in two dimensions: at the exchange level, refining and adjusting monitoring thresholds as appropriate; and at the CSRC enforcement level, market manipulation involving program trading is likely to remain a focus of enforcement, for which, further regulatory enforcement actions may also be taken in light of market situation.
