China’s five mainland futures exchanges have proposed new rules to more strictly regulate program trading, also known as quantitative trading, as part of Beijing’s effort to manage financial risks amid ongoing declines in the country’s stock markets. The exchanges, including the China Financial Futures Exchange and the Shanghai Futures Exchange, have outlined specific violations and corresponding penalties to curb misconduct associated with algorithm-driven trading strategies.
According to statements posted on their websites, market participants who fail to properly report and monitor clients’ program trading activities, or who do not implement effective internal controls and risk management measures, may face disciplinary actions. These sanctions could include warnings, reprimands, restrictions on opening new positions for up to 12 months, cancellation of membership, or fines reaching 500,000 yuan (approximately HK$586,230). The harshest penalty for egregious violations is a permanent ban from the market.
The exchanges are currently accepting public feedback on the proposed rules and disciplinary measures through Monday. The announcements come days after the China Securities Regulatory Commission (CSRC) held a meeting with market participants, underscoring the government’s readiness to take further steps to stabilize equity markets if stock declines persist.
Financial stability has become a top priority for Chinese policymakers this year, as the capital markets play a crucial role in supporting Beijing’s push for technological self-reliance by providing funding for domestic firms. Despite robust equity prices in the United States—where major benchmarks are trading near record highs despite rising Treasury yields—China’s key stock indices have experienced protracted losses. The CSI 300 Index closed down 0.3 percent recently at its lowest level in 14 months, while the technology-focused Star Market 50 index remained near levels unseen since April.
Market analysts and investors have attributed China’s equity underperformance to weak domestic demand and a cautious government stance on implementing more aggressive stimulus policies. Some also highlight the reduction of technology stock holdings by major insurers as a contributing factor. Additionally, high-frequency program trading has been criticized for exacerbating market volatility and putting retail investors at a disadvantage.
Earlier this year, both the Shanghai and Shenzhen stock exchanges introduced measures to restrict high-frequency trading, following complaints that such activities created unfair market conditions. Xu Chi, an analyst at Zhongtai Securities, emphasized the broader goal of creating a stable market environment that supports long-term investment, corporate financing, and industrial transformation.
The futures exchanges emphasized their commitment to enforcing compliance and responding swiftly to market irregularities in order to enhance overall market stability.