China is removing a key edge long enjoyed by high-frequency traders by ordering the relocation of trading servers out of exchange-operated data centers, according to people familiar with the matter.
Commodities futures exchanges in Shanghai and Guangzhou have instructed local brokerages to move client servers out of data centers run by the exchanges, the people said, adding that the initiative is being driven by regulators. While the measure applies to all market participants, high-frequency trading firms are expected to be the most affected due to their reliance on ultra-low latency access.
The Shanghai Futures Exchange has told brokers that equipment used by high-speed trading clients must be removed by the end of next month, while servers for other clients must be relocated by April 30, the people said. Similar requirements are being implemented at other exchanges.
Housing servers inside exchange data centers has allowed some traders to gain faster access to market data and execution, giving them a competitive advantage. The move suggests regulators are seeking to level the playing field, curb excessive speculation and tighten oversight of trading practices in China’s futures markets.
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