Regulatory Improvement Of High Frequency Trading In China

With the rapid development of modern information technology,the deep combination of finance and technology has also given birth to the complex product of high-frequency trading.Concerns about high-frequency trading began with the “flash crash” of May 6,2010,when the Dow Jones industrial average fell several hundred points in minutes and more than a thousand points that day.The publication of "high-frequency traders" pushed high-frequency trading to the forefront.China's high-frequency trading started relatively late.Although some private funds adopted high-frequency trading software,it was the Easton case that really pushed high-frequency trading to the public.From the perspective of comparative law,this paper studies the regulatory system of HFT.This paper consists of four chapters:First chapter starting from the history of high-frequency Trading,starting from the origin of high-frequency Trading to the regulatory definition of high-frequency Trading and Automatic Trading,Quantitative Investment,programmatic transaction(the Program Trading)and algorithmic Trading Algorithm Trading,the concept of comparison,it is concluded that these five concepts and the relationship and difference between the concept of status,finally clarify the concept of high-frequency Trading.The second chapter puts forward the necessity of high-frequency trading regulation.It starts from the trading strategies of high-frequency trading in China and summarizes the current situation,limitations and future trends of high-frequency trading in China.From liquidity provision strategies,namely market makers' strategies,to relative value arbitrage,to the controversial predatory strategies,the trading strategies of HFT are not the same as those of ordinary financial institutions,but more extreme and even fraudulent strategies.China's domestic fund industry is developing very rapidly,but in general,the proportion of quantitative private equity managers is still not high,and there is still a huge gap with the quantitative industry in mature countries such as Europe and America.This huge gap also illustrates the huge potential of China's quantitative industry and high-frequency traders.In terms of the current environment,China's environment for HFT is still in a state of restriction.Technically,the self-development of high-frequency trading software in China is still in its infancy,and whether foreign software can adapt to China's financial market is unknown.Conceptually,the concept of "high input,high output" of HFT also runs counter to the traditional investment concept of "low input,high output".Policy is the existence of T+1 restrictions,and the domestic capital market quotation is too high.However,with the further opening of the financial market,the necessity of high frequency trading regulation has been highlighted.This paper USES the three dimensions of the financial tripod theorem to evaluate the regulatory necessity of high-frequency trading,and believes that some of its own characteristics and unfair trading strategies must be fully regulated.The third chapter summarizes the regulatory framework and regulatory methods of Europe and the United States by combing and learning from the regulatory system and theories outside the region.In terms of the regulatory system,Europe is dominated by MiFID II and the commission's authorization rules,supplemented by independent supervision by the European securities and markets authority(ESMA).European regulations are comprehensive and stringent,including requirements for algorithmic firms,control requirements for high-frequency trading systems,market making strategies,direct electronic links and notification requirements for EU member states.The EU's rules cover almost every aspect of HFT.In the United States,based on the Dodd-frank act and under the joint control of the automated trading rules and the rules of the compliance and integrity system,the regulatory mode of "focusing on the prior and the latter,with less emphasis on the middle" has been formed.The three big regulators,the Securities and Exchange Commission,FINRA and the commodity futures trading commission,have also worked together in an orderly fashion,focusing on their respective regulatory priorities.The law of the United States sets a legal and illegal boundary for HFT,and provides sufficient protection for legal transactions.Although some American scholars believe that the law is not clear about the requirements of spoofing,a high-frequency trading strategy,from the perspective of judicial judgment,the judge believes that the law has made a clear elaboration on the requirements of spoofing,and there has been a certain degree of relaxation in the subjective requirements of spoofing,which strengthens the identification of spoofing.In addition,this chapter also makes a comparison between the regulatory modes in Europe and America,and provides some references for the regulatory modes in China on the basis of clarifying the respective regulatory characteristics.The fourth chapter describes the high frequency trading regulatory system in China and puts forward Suggestions for improvement.In China,there is no special legislation on the high-frequency trading law system,and there is no normative system,which also brings some problems,such as the lack of algorithmic provisions,the limitations on infrastructure and so on.However,the current norms in our country can solve the basic regulatory problems to a certain extent.Four financial regulators,such as the People's Bank of China,have also noticed the impact of homogenization of algorithms,which also marks a deeper level of regulation of high-frequency transactions in China.Of course,the regulation of high-frequency transactions is essentially a conflict between law and finance,to some extent,even unavoidable.However,this paper puts forward the J-type supervision model,hoping that by improving the existing supervision form,we can deal with the relationship between the actual and the expected,and ease the tension between the two.Medium-intensity admission filing system was adopted in the early stage,and information supervision mode was adopted in the middle stage to minimize supervision.In the later stage,the cost of illegal activities was greatly increased to prevent illegal activities.Through the form of J-type supervision,we can not only avoid considerable financial risks,but also achieve the goal of not harming financial freedom.Therefore,for the stability and security of the financial market,while dealing with high-frequency transactions prudently,relevant departments should introduce relevant laws and regulations as soon as possible,establish information sharing platform,deepen the regulation of algorithms,and even introduce code regulation in the future.The supervision of high-frequency trading can also make our financial market develop more rapidly.