Summary of Key Points
Recently, there has been significant controversy among investors regarding the fairness of quantitative trading in the A-share market and its impact on the market. In response to these concerns, the Private Investment Committee of the China Securities Investment Fund Association provided an authoritative clarification: Quantitative trading does not enjoy any special privileges such as "T+0" trading; its speed and frequency advantages have been mitigated by regulatory measures. During market downturns, quantitative institutions tend to be net buyers, with no evidence of coordinated selling pressure or malicious short-selling behavior. Regulators maintain fairness through the monitoring of abnormal transactions and the restriction of specialized trading channels. Ordinary investors are advised to adopt a long-term value investment strategy and leverage professional institutions to avoid short-term market fluctuations.
I. Does Quantitative Trading Really Enjoy Many Privileges? – A Comprehensive Answer to Fairness Concerns
Many individual investors believe that quantitative trading has special advantages, such as the ability to trade on a "T+0" basis or move faster than them. However, this is a misunderstanding:
- T+0 is Not Exclusive to Quantitative Trading: Exchange rules apply equally to all investors; both types of traders can only trade on the next day (T+1). The so-called "quantitative T+0" trading involves either using margin trading in a disguised form (which was restricted by regulators in 2024) or a "pseudo-T+0" strategy, where investors buy shares from the previous day and sell them on the same day, a technique that individual investors can also employ.
- Speed Advantages Have Been Curbed by Regulation: Quantitative trading once relied on specialized trading channels and data centers to gain speed, but now exchanges require brokers to eliminate these advantages, significantly narrowing the speed gap between quantitative and traditional traders.
- Information Disadvantage is a Technical One, Not a Regulatory Issue: Quantitative trading can process large amounts of data and make decisions in milliseconds, which individual investors cannot match manually. This difference is due to technological tools, not regulatory bias.
II. Is Quantitative Trading the Culprit Behind Market Downtrends? – The Truth About Their Behavior During Crises
After the market decline in July, some blamed quantitative trading for causing significant drops. However, the facts are as follows:
- Leading Quantum Institutions Are Often Net Buyers: Investigations by the committee revealed that during down days, many quantitative institutions were net buyers, with some making substantial purchases. This is because their main products (such as index-enhanced and long-only quantitative funds) are typically fully invested or nearly so, and trading is mainly for portfolio rebalancing, not to drive prices down.
- Strict Restrictions on Short-Selling: Quantitative private equity firms rarely use margin trading or stock index futures to suppress the market. Additionally, in February 2024, brokers were prohibited from providing margin financing to investors using "pseudo-T+0" strategies, making short-selling more difficult.
- Monitoring to Prevent Extreme Volatility: Exchanges have established indicators for large-volume transactions in a short period and intervene when these are triggered to prevent excessive market fluctuations caused by quantitative trading.
III. How Does Regulation Manage Quantitative Trading? – The Red Lines That Cannot Be Crossed
Regulatory measures against quantitative trading are becoming increasingly stringent, including:
- Monitoring of Abnormal Transactions: Exchanges have set thresholds such as more than 300 orders per second, over 20,000 orders in a day, or a cancellation rate of more than 50%. Exceeding these limits is considered abnormal trading, prompting quantitative traders to reduce their frequency and speed.
- Stricter Regulations Than Abroad: While the U.S. market allows an average cancellation rate of up to 90% without intervention, A-share markets issue warnings at a much lower rate (50%). In the U.S., thousands of orders per second are common, but in China, these limits are even tighter.
- Severe Penalties for Illegal Activities: In May 2025, an individual named Peng was fined 400 million yuan for using automated tools to manipulate stock prices. Recently, illegal stock recommendations disguised as quantitative investment have also been cracked down on.
IV. What Should Ordinary Investors Do? – Three Suggestions to Avoid the Impact of Quantitative Trading
Individual investors need not panic; they can take the following steps:
- Rational Investment: Reduce frequent trading. Since quantitative trading relies on speed and volume to generate profits, individual investors should avoid chasing gains and cutting losses to minimize their exposure.
- Long-Term Investing: Focus on quality companies. With no pressure for short-term performance, investors can invest in solid companies and profit from their growth, ignoring short-term market fluctuations.
- Professional Investment: Utilize institutional products such as public funds (index funds or actively managed funds) to let professionals manage investments and diversify risks.
V. Are There Any Benefits of Quantitative Trading for the Market? – Beyond the Negatives
Quantitative trading is not entirely detrimental; it also has positive effects:
- Enhanced Liquidity: Frequent orders from quantitative traders help reduce bid-ask spreads, lowering transaction costs for other investors and making market entry and exit more convenient.
- Stabilization During Downtrends: Quantitative trading's automatic counter-trading mechanisms can stabilize prices during major declines, preventing excessive drops.
- No Impact on Long-Term Trends: Studies show that quantitative trading does not significantly affect the long-term performance of the stock market. Many quantitative strategies consider company fundamentals, rather than focusing solely on short-term price movements.
In summary, quantitative trading is a natural outcome of technological advancement, and regulators are working to regulate its practices. Instead of debating its fairness, it is more beneficial for ordinary investors to focus on selecting quality companies and engaging in long-term investment, which is a more reliable way to generate profits.