China Curbs High-Frequency Trading To De-Risk Markets

Data from the China Securities Regulatory Commission (CSRC) showed that the number of high-frequency trading accounts declined by around 20% in 2024 to about 1,600 as of June 30 last year, reflecting regulators' long-standing discomfort with trading practices that provide liquidity but grant execution advantages far beyond the reach of most retail investors.

China's stock exchanges classify high-frequency trading as activity involving more than 300 orders or cancellations per second through a single account, or over 20,000 order requests in a day.

“Defining anything below 300 transactions per second as 'legal' has no theoretical or practical grounds,” Lin Yixiang, chairman of Tianxiang Investment Advisory and an economist, said at the 2025 Weibo Finance Night event on January 15.

“Before machine trading, a human trader doing three transactions a second would already be impressive. But letting machines do hundreds is something entirely different,” he said.“Frequent order submission and withdrawal can create fake volumes and distorted prices, seriously disrupting market order.”

In a market dominated by retail investors with high savings rates, he added, repeated losses borne by households alongside hefty management fees collected by institutions had eroded trust.

He said curbing such activity would be“an answer to retail investors and a reflection of a people-centered approach to capital market governance.”

“In China, millions of retail traders are using similar technical logic to value and trade stocks,” says a Yunnan-based columnist writing under the pen name“Big Tree.”“They have long been treated by high-frequency systems as prey.”

“After a stock drifts lower for several days, a sudden large buy order can briefly push prices sharply higher and break key technical levels, prompting retail traders to rush in,” he writes.“Yet the order may last only oneminute before being withdrawn. Prices then slump as coordinated sell orders appear, leaving dozens of retail investors incurring losses of more than 5%.”

He says that, with artificial intelligence now embedded in many high-frequency systems, algorithms are increasingly able to harvest sentiment directly from online forums and social media.

“When phrases like 'all-in' or 'target price doubled' flood discussion boards, the system reads that as extreme retail excitement and preys on retail traders,” he says, adding that headlines such as“China will boost chip self-sufficiency” are powerful triggers of these activities.

Apart from curbing high-frequency trading, the CSRC also tightened margin financing rules to reduce risks in stock trading.

On January 14, the Shanghai, Shenzhen and Beijing stock exchanges said they would raise the minimum margin requirement for new margin-financing trades to 100% from 80%.