China’s securities regulator has instructed brokerages to dismantle client-dedicated servers located in data centers at domestic stock and futures exchanges, a move that would strip high-speed traders of a key technological advantage, according to people familiar with the matter.
For years, high-frequency traders in China have relied on servers housed in exchange-operated data centers and owned by brokers, allowing them to execute trades within milliseconds—or even microseconds—by virtue of their physical proximity to trading systems.
The regulatory tightening comes as authorities intensify efforts to rein in excessive market speculation and better protect retail investors. It follows a sharp rally in China’s domestic markets over the past year that has revived concerns about the risk of another boom-and-bust cycle.
The restrictions on access to exchange data centers are expected to reverberate through China’s high-frequency trading ecosystem, which in recent years has attracted global firms such as Citadel Securities and Jane Street Group.
The China Securities Regulatory Commission (CSRC) has in recent weeks asked brokerages to remove the servers, a directive that applies to both domestic and foreign high-frequency trading clients, one of the people said.
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