Research On Legal Issues Of High Frequency Trading Supervision

FinTech(Financial Technology)brings new trading methods to the market.High-frequency trading is the product of deep integration of computer technology and finance under the development of FinTech.In simple terms,high-frequency trading is a trading method that uses computer algorithms and features high speed and high frequency.In recent years,high-frequency trading has experienced rapid development.The market has gradually expanded from the United States to Europe,Asia and other financial markets.High-frequency trading promotes the liquidity of the market and reduces the transaction costs,but at the same time there are risks such as fairness issues,technology,and market manipulation,so it needs to be overcome through supervision.The application of high-frequency trading started relatively late in China,and it is known by everyone because of the “8.16 events of Guangda”.At present,China's supervision of high-frequency trading constitutes both over-supervision and absence of supervision.With the development of FinTech and the maturity of China's financial market,there may be more and more applications of high-frequency trading in China.Regulators need to respond to this trend in a timely manner.Based on the above background,this paper studies the legal issues of high-frequency trading supervision.The body of this article is divided into four chapters:The first chapter,“Overview of High-Frequency Trading”,is the basis ofresearch.Because the technology of high-frequency trading is very complicated,a unified definition has not been formed until now.Therefore,this chapter first introduces the concept of high-frequency trading,as well as its distinctions and connections with algorithmic trading and program trading,and determines the unique characteristics of high-frequency trading relative to algorithmic trading and program trading,and describes its profitability mechanism.At the same time,this chapter also discusses the impact of high-frequency trading on the market.Although high-frequency trading has been controversial since its emergence,what can be determined now is that it optimizes the price discovery mechanism and provides liquidity for the market.For the fairness issues that it causes,high-frequency trading does not necessarily lead to injustice,but the emergence of new technologies leads to the disadvantage of the non-technical party.How to balance the interests of all parties is also a problem that regulators need to consider.In addition,this chapter also explains the development status of high-frequency trading in China,and analyzes the current restrictions on the development of high-frequency trading and the future development prospects.The second chapter “Risks and Supervision of High-Frequency Trading”.This chapter first lists the risks high-frequency trading will bring and adds typical cases for verification.Although other electronic trading may cause the same risks,these risks are more prominent in high-frequency trading.Then this chapter analyzes the necessity of high-frequency trading supervision,the development of new things cannot be separated from the combined effects of regulatory systems and technological progress.Whether it is from the perspective of real cases or from the perspective of finance or law,the legal supervision of high-frequency trading is necessary.Finally,the chapter reviews the current situation of China's supervision,and points out that China's current supervision has the problems of over-regulation and lack of supervision at the same time.The third chapter “The Reference of Overseas High-Frequency Trading Supervision”.This chapter is a comparative study of overseas high-frequency trading supervision.Unlike China,high-frequency trading starts earlier overseas andsupervision of high-frequency trading is more complete and mature.Therefore,this chapter first introduces high-frequency trading regulatory measures in United States,Germany and other countries and regions.Judging from the overseas regulatory policies,the attitude of regulators to high-frequency trading is moderate restrictions and restraints,but it has not reached the point where it must be banned.Due to the differences in market structure and trading systems between China and foreign countries,not all regulatory measures are applicable to China.However,some regulatory ideas and principles are worthy of our country's learning,such as the formulation of comprehensive and targeted supervision measures,the balance of fairness and freedom in the regulatory process.The fourth chapter “Construction of China's High-frequency Trading Regulatory System Framework”.This chapter returns to the reality of our country.According to China's current regulatory situation and the reasonable reference to overseas supervision measures,we first set the goal of China's high-frequency trading supervision,namely,“maintaining financial security,protecting financial fairness,and taking into account financial efficiency”.Afterwards,we elaborates on the regulatory model and requirements that should be adopted in China.The real development of high-frequency trading requires the guidance of government agencies as well as the participation of self-regulating organizations and securities companies.Therefore,China should adopt a three-tier regulatory supervision model,namely,government supervision and self-regulation and self-supervision.Finally,it is proposed that each regulatory body should build a specific regulatory system around the above-mentioned regulatory objectives,such as constructing an abnormal situation handling mechanism,regulating abuse of high-frequency trading,and adopting classified supervision and other measures.