Share post-disaster reconstruction and regulations released: program trading rules to seek draft issued.
On October 9, the SFC website, organization of securities commissions, drafted a program trading in the Securities and futures market regulatory regime (draft for soliciting opinions) (hereinafter referred to as the regulations), are open to the public for comment. While Shanghai and Shenzhen stock exchanges respectively, publish a public draft of the implementing regulations to manage program trading.
Surging journalists (www.thepaper.CN) as your interpretation of the rules from eight aspects.
First, what is the program trading
The regulation clarifies the definition of program trading, or "through the established procedures or specific software, or executive order is automatically generated trade practices."
Ye Wei, a researcher at the planning and development of the China Securities Regulatory Commission Committee has said that program trading, is a major innovation in securities trading. Traditional transaction methods, only the sale of a stock in a transaction, while the program trading can make use of the computer system while simultaneously selling a package of securities in a transaction. China has no specific quantitative criteria. According to United States New York Stock Exchange (NYSE) Web site August 2013, the latest regulations, any amount at the same time the sale of 15 or more concentration of stock transactions can be treated as program trading, before the NYSE program trading also include the total value of a basket of stocks the conditions need to reach $ 1 million.
Second, program trading strategies
Ye Wei concluded five such program trading strategies:
Is arbitrage and hedging-strategy: through two or more price differences between different types of subject matter of profit or hedging, it includes cross-breed arbitrage, arbitrage across markets, inter-temporal arbitrage, options arbitrage, arbitrage, statistical arbitrage and hedging, options, hedging and other types.
Second, predictive strategies: the subject matter of the same type, using their historical performance and predict future investors in the current market situation. It includes trend, momentum and reverse forecast, Alpha forecasts, average duration, multiple stock, as well as complex based on support vector machine, price forecasting based on fractal theory, Kalman filtering.
Third, event rules strategy: for special events in the market, as well as specific rules for investors to invest, it includes investment and investment rules.
Four is the automated market-making strategies: as with normal market maker, automatically making high-frequency traders through sale and purchase orders to provide liquidity to the market. Difference is, they reverse operation with the investors. Automated market maker of high-speed computer with super fast order issued by intention of the ability to find other investors. For example, at breakneck speed after a buy or sell order has been issued, if not sold quickly, the order will be cancelled immediately; however, if done, the system captures information to a large number of potential, hidden order, in order to make a profit.
Five markets follow strategy: capturing market trends, the market followed, such as the frequent order/cancellation, inducible.
In addition, there is a type of advance access to information policy, which is currently illegal investment strategies, such as Flash trading, have been United States securities against NASDAQ market starting from September 1, 2009, and end the use of Flash orders.
Third, program trading advantages and disadvantages
Programmatic transaction both to improve market liquidity, improving the efficiency of market prices found positive effects; there are also increasing market volatility, market fairness and other negative effects. China capital market investors, trading high turnover rate, large price fluctuations, restrictions on program trading requires strict management, development, seek advantages and avoid disadvantages, and specifications.
Shanghai Securities analyst Cai Junyi think program trading, agencies are at a huge advantage through back orders, can directly or indirectly influence investor mood swings, increasing market volatility: "retail is playing but institutional, program trading platform and program costs. "
Is visible, the Shanghai and Shenzhen exchanges 7 August focus on roll limited the number of unusual trading account, which refers to the use of capital, causing serious interference with the market price. Universal quantification, and hedging characteristics of these accounts, it was program trading.
Shanghai Securities News reported that in a SSE restricted trading in trading account on July 8, today declared sold nearly 16000 total declared amount sold more than 1.5 billion yuan, declared after selling back up to 99.18%. Such frequent reporting would interfere with the normal price signals, easy to market and stock market gains helped drop the effectiveness, impact market stability.
Quantitative Fund Manager also admitted that under the market rises and falls, program trading on market gains helped drop effects, such as hedging, buying a basket of stocks, and stock index futures short.
Four, a Declaration and verification system
According to the Shanghai and Shenzhen Stock Exchange rules, program trading should be 3 days in advance to receive delegates its trading securities companies and futures companies to declare, verified before they can be programmed trades.
Reporting and reporting should include: the identity of program trading; used for program trading account information; program trading policy types and a brief description type of funding program trading; program trading system configuration parameters programmed trading server address; development of program trading systems; contact person and contact information.
Exchange requirements, program trading can use only one securities accounts, stock options contracts account for transactions in securities and stock option program. Program trading shall not be undeclared and reporting accounts used for program trading.
The management approach calls for program traders were carefully programmed trading, and wind control function on program trading system should have clear requirements require securities companies and futures companies to establish a program trading access verification system access agreement with the customer, to continue the program trading system access management; requirements related to securities and futures exchanges to develop program trading system access management standards, identification of risk control requirements. Securities and futures industry association program trading system should meet the risk control function and access management related to the introduction of industry standards.
Five, establish directives system
The regulation requires that securities companies and futures companies programmed and non-programmed trading risk isolating mechanisms, offer for program trading accounts using a dedicated channel, and set the flow control. Securities companies and futures companies and fund management companies should strengthen customer and its audit program trading instructions and manual review in due course. Securities, futures and the Fund Industry Association will introduce securities companies and futures companies, fund management companies of programmed orders audit guidelines.
Commission explained that directive is a new initiative of the auditing system, compared with the artificial trading, program trading has declared speed features, reporting frequency, the regulations require that securities companies and futures companies set up instructions review system rather than unfiltered program trading instructions directly to Exchange hosting, designed to safeguard the normal order of the market to avoid excessive impact on market liquidity.
"All in all, when program trading transaction amounts or frequencies when you have a significant impact on market liquidity, even if it does not have the effect of market price or trading volume of intent, also have obligations of prudent trading. "The Commission stressed.
Set SI Lu Zheng Zhiyong, Deputy Chief believes that this can be achieved by monitoring program trading: "high-frequency trading is difficult to exist. "
It is worth mentioning that, provided for in the regulations, program traders involved in securities and futures trading in the territory shall not be assigned by the overseas deployment of program trading systems trading orders, program trading system and outside the territory may not be attached to a computer, computer remote control outside.
Six or eight kinds of unusual transactions Act focused on monitoring
The regulations expressly enumerates the prohibited program trading and asked securities and futures exchanges and strengthen the monitoring of program trading.
Under Exchange rules, will focus on securities trading include: more than five times within one day declare 5 per second; a second complete declaration and to withdraw the Declaration, and days 3 times above; day-Declaration more than 2000.
Stock option trading focus concern object for: a day within appeared 5 times above each seconds declared five; days declared in 4000 pen above, and exists a seconds within in same option varieties different contracts different direction open warehouse of behavior; days declared in 4000 pen above, and exists a seconds within in 2 a and the above option varieties Shang open warehouse of behavior; days declared in 4000 pen above, and exists a seconds within completed declared and revoked declared of behavior.
More important is that the exchanges identified eight unusual operations and transactions will be monitored:
1. no transaction for the purpose of frequent declarations and revoke a declaration, or large-value Declaration and to withdraw the Declaration;
2. frequent declarations and revoke a declaration at a price limit price, or large-value Declaration and to withdraw the Declaration;
3. the declared price market price deviation from declared large Declaration and to withdraw the Declaration misled other investors, but small multiple Declaration on the reverse and deal;
4. row higher than the recent Declaration of the transaction price bought or sold at below the recent price report in a row, causing rapid price rise or fall, guidance, strengthening the Declaration on the reverse and sold heavily in price trends;
5. through the continuous reporting or big declarations, interfere with or delay the normal reporting of other investors or sold;
6. in the closing stages large and continuous trading, affecting price;
7. is part of the same subject, or is under common control or allegedly associated with transactions between accounts;
8. automatically by a computer program under a single, quick orders, affecting or likely to affect the normal trade order;
9. what other unusual transactions should be monitored.
Is visible, it is the SFC for the refinement of unusual transactions Act for the first time.
Analysis of Cai Junyi, securities and Futures Commission for the definition of unusual transactions Act is quite detailed: "here, after all, retail, and investment climate. "
Galaxy securities said, currently many institutions with of developers provides of Xia single system, actually nature is a automatically split single of algorithm trading strategy, according to its understand, often will appeared large withdrawal single of situation, according to I speculated that, the algorithm to reached trading requirements, will Xia "some not sold on withdrawn" of single, can through Xia single Hou several seconds no sold on revoked, then again Xia single, such may will because market delay, and handicap price beat too fast, led to not sold and withdrawal single.
Galaxy securities believes that after the formal introduction of the management measures, developers may need a new development trading algorithms, appears to prevent mass cancellation. One approach is to extend order waiting time, could be considered easier to deal price orders, such as selling the second price, but buying is still less than the selling amount. Li keqiang held State owned enterprise reform
"As the market changes, files may be gradually modified space. "Cai Junyi said.
Seven, will establish a "blacklist" system
For violation management approach provides of, according to different situation, Securities Futures Exchange will law take warning, and limit account trading, and improve margin, and limit positions, and forced flat warehouse, self-discipline regulatory measures; securities, and futures industry association will established violations programmed trading who of "blacklist system", in must time within, securities company, and Futures company are shall not accept its programmed trading delegate; China SFC will depending on situation law take ordered corrected, and regulatory talk, and issued warning letter, and Not accept administrative licensing-related files, suspension of their relevant regulatory measures such as, depending on the persons concerned to take stock market measures into serious, give the administrative penalty in accordance with law. Suspected of a crime, will be transferred to the judicial organs according to law, be held criminally responsible.
The next step eight, the SFC
Cai Junyi believes that the management measures of the SFC issued a follow-up measures to regulate the market, designed to protect small investors, and limited futures, combat field distribution and other related provisions in one continuous line.
As for the impact on the short-term market, Cai Junyi said not too much: "program trading market, after all, is small, does not exceed the volume 5%. "
Cai Junyi is expected, as a reflection of crash, SFC will follow relevant laws and regulations, and combating capital markets.