China | Foreign investors slam new Chinese stock trading rules

Foreign investors slam new Chinese stock trading rules

November 13, 2015 2:22 PM (UTC+8)

 

Foreign investors and brokers have written to Chinese regulators coming out against newly proposed rules to curb high-speed trading that many have blamed for the stock market crash over the summer.

The Asia Securities Industry & Financial Markets Association (ASIFMA), a group of comprised of global banks and foreign investors sent a letter to the China Securities Regulatory Commission (CSRC) Sunday saying that the rules to stop “program trading” domestically would mean foreign firms could not send electronic trades from Hong Kong to brokers onshore, and could kill off billions of dollars of investment into China, reported Reuters.

“The proposed restriction on investors using algorithmic trading to connect to Chinese brokers onshore is huge — if you can’t use automated systems, you can’t trade on Stock Connect,” said one person involved in drafting the letter, according to Reuters.

titleLast month, the CSRC began to study the program trading rules in order to limit on a range of automated trading practices blamed for the summer rout. The consultation closed on Sunday.

The letter warned Chinese regulators that the proposals could hurt major investment channels worth around $160 billion, including the year-old Stock Connect scheme, which links the Hong Kong and Shanghai bourses.

The lobbying efforts reflect growing fears that Beijing is responding to the summer rout by halting or even reversing reforms to allow greater access to its capital markets, said Reuters.

Plans to expand the Stock Connect scheme to the Shenzhen exchange and to include new listed products stalled after mainland bourses tumbled 45% between June and August and Beijing intervened through a range of measures to stop the plunge.

ASIFMA represents the world’s biggest financial institutions including Goldman Sachs, Morgan Stanley and Credit Suisse.

 

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