The Chinese regulator has imposed a one-year ban on some trading for the quantum investment fund

The Chinese regulator has imposed a one-year ban on some trading for the Shanghai Weiwan quantum investment fund. This is another measure by the Chinese authorities against funds involved in high-frequency trading. The measures are being introduced amid a falling Chinese stock market and an outflow of foreign capital.

Yesterday evening, February 28, China Financial Futures Exchange banned investment fund Shanghai Weiwan Fund Management to open new positions in stock futures. The ban will be in effect for 12 months. The statement said the fund “used impermissible means to circumvent exchange trading limits.” Shanghai Weiwan will also have 8.9 million yuan ($1.2 million) confiscated as illegal income.

The measures introduced against Shanghai Weiwan are another recent sign that the Chinese authorities have become interested in the activities of quantum funds.

Last week, the Shanghai and Shenzhen exchanges banned trading for one of the largest quant funds, Ningbo Lingjun Investment Management Partnership, for three days. This case also involved a violation of trading rules – the exchanges stated that high-frequency trading should not jeopardize the operation of the exchange’s systems or normal trading procedures. Previously, short-term trading bans were introduced for some other quant funds.

China’s Securities Regulatory Commission (CSRC) yesterday also announced its intention to strengthen control over the stock market, including quantum funds, and to more actively suppress illegal activities. Experts attribute the activation to return to the leadership of the regulator Wu Qing, who once earned a reputation as a “broker butcher” for the fact that, when he was the head of the Securities Exchange Commission in the mid-2000s, he closed 31 companies for violating trading standards. It is reported that the SEC has also already created a group that will monitor short selling of securities on the exchange as a whole and, if deemed necessary, issue warnings to market participants. Some local exchanges have also issued warnings about stricter trading controls.

The introduction of new restrictions comes amid a falling Chinese stock market and capital outflow from the country.

According to media reports, Chinese regulators believe that quantum funds disrupt the normal operation of exchanges and contribute to increased volatility. “Regulators are sending a clear signal that money should be managed by companies that profit from long-term investments, not from quick trades,” said Yang Tingwu, deputy head of the Tongheng Investment fund. Chinese authorities have recently introduced other trading controls in an attempt to prevent the local stock market from collapsing. So, at the end of January, the Chinese authorities limited access for retail investors to funds investing in foreign securities.

Yana Rozhdestvenskaya