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China exchanges to tighten quant hedge fund supervision

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Chinese quant hedge funds are facing a clampdown on their activities by the country’s two main stock exchanges following restrictions imposed on Lingjun Investment, a major player in the sector, for “abnormal trading”, according to a report by Bloomberg.

In statements issued on Tuesday, both the Shanghai and Shenzhen exchanges said they are planning to increase their monitoring of quant trading, and in particular leveraged products, in a bid to reduce market volatility as part of wider efforts to reverse a slump in domestic stocks that is now entering a fourth year.

Both bourses are expanding the scope of required reporting of such trades to offshore investors via the northbound mainland-to-Hong Kong stock connect and will both treat foreign and domestic funds in the same way, according to the statements.

The move comes after Lingjun was hit with a three-day trading suspension after selling a combined RMB2.57bn worth of shares within a minute of indices falling rapidly in Monday.

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