Chinese regulators appear to be preparing new rules for quantitative trading firms and the use of artificial intelligence in financial markets after recent losses exposed the risks of crowded technology-driven trades, according to a report by Bloomberg.
The report cites Shanghai Securities News as saying that the China Securities Regulatory Commission (CSRC) held an unusually large number of consultations with investors, listed companies and industry experts over two days this week.
The discussions pointed to a need for greater oversight of quantitative trading, the state-backed publication reported. The newspaper was founded by the Shanghai Stock Exchange and is now managed by Xinhua News Agency.
The consultations followed one of the most difficult periods for Chinese quant funds in recent years. Sharp losses earlier this month unsettled wealthy investors and raised concerns that the AI-led stock rally had become excessively speculative.
The language used by officials and experts during the consultations may indicate that more targeted measures are being considered. Earlier discussions had focused broadly on regulating the “development” of quantitative trading and AI applications, while later meetings referred more specifically to regulating the “behaviour” associated with those activities, according to the report.
That change in emphasis suggests regulators could be moving towards specific rules governing how quant strategies and AI are used in the market.
China took more aggressive action against quantitative trading during the market turmoil of 2024, including freezing the accounts of a major fund and restricting trading firms from unwinding leveraged positions.
Quantitative strategies have since continued to grow rapidly in popularity, with some products attracting billions of yuan shortly after launch.
The latest regulatory discussions form part of a broader effort by Beijing to stabilise markets after a month-long selloff in technology stocks.
State-backed investors, known as the “National Team”, increased purchases of equities, while a number of listed companies announced share buybacks. The measures helped support a rebound in Chinese stocks earlier this week, with the CSI 300 index edging higher on Thursday.
Quantitative trading itself is not inherently problematic, Shanghai Securities News said, but it should not become an “amplifier of market volatility”. The publication cited experts calling for clearer boundaries around the use of technology in financial markets.
CSRC Chairman Wu Qing has also recently said the regulator would focus on preventing risks, strengthening supervision and supporting the long-term development of China’s capital markets.
