Clifford Chance

Program trading in China will be regulated

16 October 2015

The significant drop in the value of China's stock market since June 2015 has prompted the China Securities Regulatory Commission (CSRC) to initiate an investigation on its securities and futures markets.  Program trading, which features frequent order submission and cancellation, seems to be believed as one of the reasons causing market volatility.  Since July 2015, the Shanghai and Shenzhen Stock Exchanges have restricted the use of certain accounts that were suspected of interfering with stock price or misleading investors by frequent order submission and cancellation.

With the A-share market gradually becoming more stabilized, in the absence of existing specific regulation, CSRC issued the consultation draft of the Administrative Measures for Program Trading on the Securities and Futures Markets (CSRC Consultation Draft) on 9 October 2015, with a view to supervising program trading in the securities and futures markets.  CSRC explains that the CSRC Consultation Draft is aimed to correct deficiencies and minimize risks which have emerged with the rapid development of program trading in China.  At about the same time, the stock exchanges and futures exchanges in China have respectively published their own draft exchange rules on program trading in line with the CSRC Consultation Draft.

 

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