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🔥 Speed is outlawed: China bans high-frequency trading⠀
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A hedge fund has received a one-year ban for abusing high-speed trading. This punishment means an escalation of the fight against quantitative trading, as the regulator tries to resuscitate the Chinese stock market after three years of losses.⠀
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High Frequency Trading technology is an algorithmic, very aggressive trading method in which the execution of a huge number of deals is realized in a matter of milliseconds. Such deals allow to open at the most favorable price, trade large volumes and maximize arbitrage opportunities.⠀
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The Shanghai Futures Exchange banned Shanghai Weiwan Fund Management from opening positions for 12 months, while confiscating 8.9 million yuan ($1.2 million) in illegal (according to the regulator) profits. Traders at the fund used HFT-deals to circumvent restrictions on deals in several stock index futures, and the fund did not disclose personal connections between its controller's accounts with stock speculation accounts.⠀
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In early February, the Shanghai and Shenzhen stock exchanges blocked the accounts of a large quant fund, Ningbo Lingjun Investment Management Partnership, for three days after it sold 2.57 billion yuan worth of shares in less than a minute, exacerbating a falling market.⠀
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This player speculated using its "Direct Market Access" ("DMA") software, which typically use swap contracts and have high levels of leverage. Previously, some DMA funds were prohibited from taking short positions altogether.⠀
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These measures helped support the market, with the benchmark CSI 300 index up about 10% from its five-year low, but traders saw the ban as an impediment to a free market.⠀
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What do you think?⠀
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Profits to y’all!