Recent market discussions have intensified around the fairness of quantitative trading, its role in concentrated sell-offs, high-frequency short-selling, trading rules, and regulatory oversight. Many retail investors express concerns about "black-box harvesting" and "rule privileges" associated with quantitative strategies. In response to these widespread concerns, the Private Securities Investment Committee of the Asset Management Association of China (hereinafter "the Committee") has provided an exclusive interview to address these market misconceptions, offering a detailed analysis of the current state of A-share quantitative trading, regulatory frameworks, and industry realities, while signaling a push for standardized development.
Clarifying the Biggest Misconception: No Exclusive T+0 Privilege for Quantitative Trading; Rules Apply Equally to All Market Participants
A common market belief is that "quantitative traders can use T+0, while retail investors are limited to T+1." The Committee categorically denies this, stating that existing exchange trading rules apply equally to all investors. The spot stock market uniformly follows the T+1 system, and quantitative institutions do not possess special trading permissions.
The so-called intraday two-way operations are actually "base position rollover trades" available to all investors. For example, holding a stock on day T-1, then increasing positions on day T while selling original holdings, is not a system-level T+0. Additionally, since 2024, regulators have strictly restricted the use of securities lending to create a disguised T+0, explicitly prohibiting brokers from providing securities lending services to investors conducting intraday round-trip trades, thus closing off arbitrage opportunities in the system.
Addressing the common feeling of "being harvested" or facing unfairness among retail investors, the Committee objectively analyzes the root cause of the gap. The advantages of quantitative trading stem from technological capabilities such as massive data processing, automated model-based decision-making, and programmed order execution, not from preferential trading rules. Retail investors, relying on manual monitoring and subjective judgment for manual trading, naturally face disadvantages in information, speed, and computing power when engaging in multi-asset, high-frequency short-term trades.
Regulators have implemented multiple measures to mitigate the speed advantage of quantitative trading. These include eliminating exclusive independent trading gateways for quantitative clients, relocating servers out of exchange computer rooms, and establishing clear monitoring thresholds for abnormal trading. For instance, high-frequency monitoring standards now flag orders exceeding 300 submissions or cancellations per second, or total daily submissions and cancellations exceeding 20,000, guiding the industry toward lower frequency and speed.
Regarding online rumors of strict overseas restrictions on high-frequency trading, the Committee has investigated and debunked them. The U.S. Securities and Exchange Commission and exchanges do not have hard rules limiting orders to 15 per second, a cancellation rate of 15%, or an order stay of 50 milliseconds. Overseas institutions can submit or cancel orders at rates of tens of thousands per second during active periods without disclosing core strategies or order details. In contrast, A-share regulations on quantitative trading are significantly stricter than foreign markets. Currently, A-shares set a 50% cancellation rate as an abnormal monitoring indicator, compared to average cancellation rates of 90% in U.S. stocks and 70% in Japanese stocks, highlighting a more stringent regulatory approach.
Addressing Market Decline Controversy: Quantitative Trading Did Not Cause Concentrated Sell-Offs and Has No Motive to Actively Short the Market
During the market adjustment phase in July, many investors attributed the decline to concentrated sell-offs by quantitative traders or short-selling via securities lending. The Committee, referencing data from leading brokerages and quantitative private equity firms, presents a contrary conclusion.
On days of sharp declines, most major quantitative institutions were net buyers, with no evidence of unified or concentrated selling. The main domestic quantitative products, such as index-enhanced, quantitative long-only, and quantitative neutral strategies, typically maintain high positions of over 90% year-round, with trading behavior primarily focused on rebalancing between individual stocks. Large-scale, short-term sell-offs would directly impact their own position costs, leading to losses, meaning quantitative institutions have no financial incentive to initiate such sell-offs. Quantitative trading rarely uses securities lending or stock index futures to short and depress the market. In extreme volatility scenarios, quantitative models often trigger automatic buy programs, offsetting market panic selling and stabilizing short-term extreme fluctuations.
Exchanges have established monitoring indicators for "large-volume, short-time trades." If programmatic trading triggers index anomalies, self-regulatory measures will be taken immediately to prevent the use of quantitative tools from exacerbating market volatility.
Analyzing the True Role of Quantitative Trading: Enhancing Market Liquidity, Not Just Short-Term Speculation
The Committee objectively outlines the positive contributions of quantitative trading to the market, correcting the one-sided view that "quantitative trading is only about short-term speculation and ignores fundamentals."
Quantitative trading enhances market liquidity by covering thousands of individual stocks with dispersed single-trade amounts, narrowing bid-ask spreads, reducing transaction costs for all investors, and broadening market depth. It acts as a counter-cyclical buffer, as during market surges or crashes, quantitative programmatic reverse trading mechanisms can counteract one-sided trends, preventing extreme price deviations. Quantitative strategies are diverse and not purely short-term speculative. Many quantitative models incorporate fundamental, dividend, and growth factors, with index-enhanced and active quantitative products maintaining high positions in a basket of stocks over the long term, generating returns through optimized portfolio holding. There is no significant correlation between medium- to long-term market trends and quantitative trading.
The Committee further emphasizes that there is no unified market manipulation behavior characteristic of A-share quantitative trading. Most quantitative holdings are dispersed across over a thousand individual stocks, with low proportions of individual stock submissions and trade volumes. Frequent false order submissions and cancellations are not common industry practices.
Regulatory Tightening Continues: Full-Chain Crackdown on Violations Related to Quantitative Trading, with Clear Penalty Cases
All programmatic and quantitative trading is currently subject to the rigid constraints of the Securities Law. Regulators have built a comprehensive monitoring and penalty system around quantitative trading. Normalized monitoring indicators cover all aspects: instantaneous submission rates, frequent cancellations, large centralized trades, and high cancellation rates are all included in real-time screening. There is zero tolerance for false submissions not intended for execution, which could induce retail investors to follow trends. For serious violations, the China Securities Regulatory Commission (CSRC) imposed a 400 million yuan fine in 2025 on individuals using programmatic tools to falsely submit orders and manipulate stock prices. Special campaigns target new types of misconduct, such as joint operations with public security agencies to crack down on illegal stock recommendations under the guise of "quantitative investment," and to strictly penalize cases of inducing investors and charging fees for illegal advice. Policy at the top level continues to improve, with the CSRC clarifying that it will persistently optimize the regulatory mechanism for programmatic trading, strengthen fairness constraints, curb institutional abuse of technological advantages, and implement more detailed regulatory arrangements in the future.
Practical Advice for Ordinary Investors: Leverage Strengths, Avoid Shortcomings, and Move Beyond the Pitfall of Short-Term Competition with Quantitative Trading
For ordinary investors adapting to a market environment where quantitative trading is normalized, the Committee offers three rational investment approaches. First, abandon short-term trading thinking and adhere to long-term value investing. Retail investors have unique advantages, such as no short-term performance pressure and flexible capital durations. Focusing on the long-term growth of listed companies and profiting from enterprise value appreciation can help avoid the psychological impact of short-term quantitative fluctuations. Second, reduce chasing rises and selling on dips, minimize frequent trading, stabilize trading rhythms, and overcome emotional operations driven by panic and blind following, thereby weakening competition with quantitative strategies in short-term speed. Third, seek diversified allocation through professional institutions. By using standardized products like public funds, investors can leverage institutional research, quantitative risk management capabilities, and multi-asset allocation, relying on professional tools to smooth out volatility risks in a single market.
Conclusion
The Committee states that quantitative trading is an inevitable trend in the digitalization and professionalization of capital markets, with AI technology continuing to empower quantitative investment. The industry's development path is one of "standardization + development" in parallel. The regulatory side will continuously refine trading monitoring rules and steadily narrow the technological gap between institutions and retail investors. At the market level, the positive role of quantitative trading in providing liquidity and hedging volatility cannot be ignored. Investors need not over-fear quantitative trading. Returning to value, rational thinking, and long-term positioning represent the optimal choice for adapting to the current market structure.