China tightens scrutiny over programme trading

SHANGHAI (Reuters) -China’s securities regulators tightened scrutiny over programme trading on Friday, seeking to better regulate the use of computer-generated algorithms in stock trading.

The new rules comes after a raft of stimulus measures by the China Securities Regulatory Commission (CSRC) failed to drive a sustained market rally, for which some blamed apathetic selling from programme trading.

Programme trading has become increasingly active in China’s stock market in recent years, and “helps improve trading efficiency and market liquidity”, the CSRC said in a statement.

“However, it increased market volatility in certain conditions, so it’s necessary to regulate its development.”

Under the CSRC’s guidance, and in response to market calls, the stock exchanges of Shanghai, Shenzhen and Beijing published management rules and initiated a reporting system for programme trading.

Under the rules, brokerages are required to strengthen management of programme trading, and stock exchanges will step up monitoring of abnormal trading behaviours.

Regulators will also strengthen oversight of high-frequency trading, and new rules are aimed at promoting healthy market development.

However, the CSRC estimates that the number of trading accounts to be subject to the new reporting regime is small, and normal trading by small investors would not be impacted.

(Reporting by Shanghai newsroom; Editing by Alex Richardson)