China Clamps Down on High-Speed Stock Traders

China is pulling the plug on a key advantage held by high-frequency traders, removing servers dedicated to those firms from local exchanges’ data centers, according to people familiar with the matter, Bloomberg News reported.

The clampdown will hit China’s army of domestic high-frequency firms and also affect a swathe of global firms that are active in the country. (Photo: 钉钉 Wikimedia Commons)

Commodities futures exchanges in Shanghai and Guangzhou are among those that have ordered local brokers to shift servers for their clients out of data centers run by the bourses, according to the people, who said the move was led by regulators.

The change does not only affect high-frequency firms, but they are likely to feel the biggest impact.

The Shanghai Futures Exchange has told brokers they need to remove equipment for high-speed clients by the end of next month, while other clients must do so by April 30, the people said.

The clampdown will hit China’s army of domestic high-frequency firms and also affect a swathe of global firms that are active in the country.

Citadel Securities, Jane Street Group, and Jump Trading are among the foreign firms whose access to servers is being affected, the people said, declining to be named as the matter is private.

The changes threaten a speed advantage that high-frequency traders and quant hedge funds have long used to beat rivals.

By using servers located in the exchanges’ own data centers, these firms can achieve slightly quicker execution than others — an edge in markets where every millisecond counts.