Special Appointment | Zhou Xinyu

The intensive introduction of favorable policies for clusters indicates that the bottom or bottom area of this round of policies has been confirmed. Next, it mainly depends on whether the market confidence can recover quickly. From the perspective of investor confidence recovery, the implementation of the new quantitative trading rules on October 9 made shareholders see the warmth of the regulatory authorities to protect the market and respond to market anxiety. The formation of the "psychological bottom" will also greatly promote the arrival of a new turning point of the "market bottom".

Recently, quantitative trading has caused great controversy, with some holding the "illegal theory" and some holding the "transaction theory". On September 1, the quantitative private placement of the head "Mingyong Investment" was issued three tickets by the Shanghai Securities Regulatory Bureau. On the same day, the CSRC guided the stock exchange to introduce a series of new measures to strengthen the supervision of procedural trading. The high-level "one hammer to fix the tone" not only affirmed the positive factors of procedural trading, but also pointed out that "it is necessary to guide its standardized development according to the situation". This "guidance theory" established the new thinking of the regulatory level on the realistic management of high-frequency quantitative trading, The securities market has been further consolidated, and more substantive measures are expected to be taken in the next step.

(Data pictures are for reference only)

The author believes that the period of barbaric growth of quantitative trading has officially ended in China's securities market, marked by the introduction of a series of new measures to strengthen the regulation of programmed trading. What impact will this institutional arrangement bring to the securities trading market? Will the measures on October 9 become the starting point of the market bottom after they are officially implemented?

New regulatory measures were implemented on October 9

The era of brutal growth of quantitative trading has ended

It is undeniable that high-frequency trading is characterized by a speculative direction that helps increase and decrease, which can often exaggerate the panic of the market, and it is inevitable to strengthen constraints on it. The rumored "three criticisms" have made a lot of noise. First, the head quantification institution has the monopoly advantage of securities lending, which is equivalent to obtaining the T+0 privilege, which leads to extreme unfairness in the market; Second, quantitative institutions have strong information advantages and information processing advantages. They can use a large number of high-frequency orders and cancellations to create false market sentiment, and immediately complete the securities lending to lock in earnings, which seems to be suspected of securities manipulation; Third, the most active funds in the market are mainly harvested quantitatively.

The author believes that quantitative trading is a problem in the development of China's securities market and must be solved in the process of development. As a new trading method, there must be many imperfections and even serious defects. However, we cannot deny the vitality of financial innovation. We can guide it to exert its positive energy on the market through regulatory measures that keep pace with the times.

Recently, the official official account of the CSRC issued a document, which was very objective in quantitative evaluation and professional in feedback. The author believes that, marked by the introduction of a series of new measures to strengthen the regulation of programmed transactions, the era of barbaric growth of quantitative transactions has ended, and the new idea of "guidance theory" regulation will promote progress while maintaining stability in the market. On October 9, the implementation of the new quantitative trading regulation policy will bring new momentum to the market.

Since this year, the Shanghai and Shenzhen Stock Exchanges have revised and upgraded a series of trading rules, and made detailed abnormal trading monitoring indicators for false declarations, pushing up and suppressing, maintaining price limits, and self buying and self selling. On September 1, in order to promote the standardized development of program trading, the CSRC guided the Shanghai, Shenzhen and Beijing Stock Exchanges to formulate and issue the Notice on Matters Related to the Work of Stock Program Trading Report and the Notice on Matters Related to Strengthening the Management of Program Trading, which is a measure taken by the regulatory authorities to comply with market calls and deepen institutional innovation in key areas, This marks the initial establishment of China's stock market program trading report system and the corresponding regulatory arrangement system.

The author believes that this means that the era of high-frequency quantitative "wanton" running and strategy "streaking" is over, and the era of strong quantitative trading supervision in China has begun. Quantitative private placement should firmly establish the awareness of compliance, make judgments closely around the regulatory bottom line, and should not go beyond the pitfall. The wild growth of disorderly competition has passed, and the golden age of quantitative trading regulated by the rule of law has come. Only when it is stable can it go far.

Quantitative frequency reduction will be the future development trend of the industry

After formal implementation, it may become the starting point of "market bottom"

It is worth noting that what impact will this institutional arrangement bring to the securities trading market? The author believes that:

First, it will increase the compliance cost of quantitative private placement and quantitative transactions. First, business compliance. The system clearly stipulates whether the account capital scale and source of quantitative trading, whether to use leverage, leverage capital scale and source, leverage ratio, the type and main content of quantitative trading strategy, the order execution method of the strategy, the maximum declaration rate, the maximum number of declarations per day, whether it has the characteristics of high-frequency trading, especially without confirmation of the report, Programmed transactions shall not be carried out. The author believes that the focus of the regulatory department is to improve the compliance of quantitative private placement through the confirmation of information, and prevent high-frequency transactions from fluctuating with the price, resulting in a "negative feedback loop" phenomenon of continuous decline in the market. The second is to limit high-frequency quantitative transactions and increase operating costs. The author believes that the purpose of this action is to prevent investors in program trading from manipulating securities by taking advantage of capital, which will lead to more complex operation of institutional products, more products, and quantitative frequency reduction will be the future development trend of the industry.

Secondly, the trading securities companies are in the front line of daily monitoring and management of program trading, and will conduct all-round monitoring before, during and after the event. The new policy has clearly required securities companies to strengthen the management of their own and their clients' procedural trading behaviors, strengthen monitoring of orders that may seriously affect market prices and liquidity, and timely identify, manage and report clients' suspected abnormal trading behaviors. For those that may affect the safety of the trading system or the normal trading order, members may take measures such as rejecting their procedural trading entrustment and revoking relevant declarations.

Finally, the most important thing is the limited impact on the overall market. At present, due to the low proportion of stock accounts to be reported in the securities market, this regulatory measure will not affect the normal transactions of small and medium-sized investors. At the same time, the latest quantitative private investment scale is about 1.5 trillion yuan, which is not large compared with the overall market scale. Therefore, the strong supervision of quantitative transactions will not have too much impact on the overall market.

The goal of supervision is to guide the whole market to achieve healthy and orderly development through the continuous adjustment of rules and the adjustment of the implementation process. With the formal implementation of quantitative regulatory measures on October 9, is the big starting point of "market bottom" coming?

The author believes that the current situation is still in the transition period. With the intensive introduction of favorable policies for clusters, such as policy support in the capital market (adjustment of stamp duty), policy support for real estate, local debt, and key manufacturing industries, as well as the intensive implementation of centralized regulatory policies and measures, such as strengthening the system of independent directors, strengthening the quality of accounting information, combating securities manipulation and fraud, and issuing new regulations on banning the sale of shares, All of them indicate that the bottom of this round of policy or the bottom area has almost been confirmed. Next, it mainly depends on whether the market confidence can quickly recover? If the excessively pessimistic expectations of the economy are reversed, the market bottom may be easily touched. From the perspective of investor confidence recovery, the implementation of the new quantitative trading rules on October 9 also made shareholders see the warmth of the regulatory authorities' care and response to market anxiety. The formation of the "psychological bottom" will also greatly promote the arrival of a new turning point of the "market bottom".

(This article has been published in the Securities Market Weekly on September 9. The article only represents the author's personal views, not our position. The individual stocks mentioned in the article are only for analysis, not for investment advice.)