Quantitative and Programme Trading Rules

Programme trading rules in China at a glance

Programme trading rules in China now apply across both the securities and futures markets. In the securities market, the China Securities Regulatory Commission (CSRC) issued the Provisions on the Administration of Programme Trading in the Securities Market (Trial) in May 2024, and they took effect in October 2024. The Shanghai, Shenzhen and Beijing stock exchanges then issued detailed implementing rules, which took effect on 7 July 2025. In the futures market, the CSRC issued the Provisions on the Administration of Programme Trading in the Futures Market (Trial) on 13 June 2025, effective 9 October 2025.

The common thread is that anyone using computer programs to generate or place orders automatically must report before trading, must have tested and controlled systems, and is monitored for trading patterns that could disrupt orderly markets. High-frequency traders face additional obligations.

For international managers, the practical effect is that algorithmic access to mainland markets now resembles a regulated activity with its own documentation, rather than a technical matter left to the broker. Strategy design, broker selection and fund documentation all need to account for the framework.

Why the rules were introduced

The framework grew out of concern that rapid growth in quantitative strategies, particularly among private fund managers, could amplify volatility, create unequal access to market infrastructure and make it harder to detect manipulation. The State Council's April 2024 opinions on strengthening capital market supervision called for tighter oversight of programme trading, and the CSRC's provisions followed shortly afterwards. The stated policy is not to prohibit quantitative trading, but to make it visible to regulators, require responsible system design and ensure that high-frequency participants do not gain an unfair advantage over other investors.

The rules operate alongside the general prohibitions on market manipulation and the obligations of brokers and fund managers under the Securities Law, the Futures and Derivatives Law and asset management regulation. A strategy that complies with the reporting rules can still be investigated if its effect is to mislead the market or distort prices.

Technology policy is moving in parallel. In October 2026 the CSRC announced measures that include an opinion on the use of artificial intelligence in the securities and futures industry, as reported by China Securities Journal. Managers using machine learning to generate signals should expect governance questions on model risk to sit alongside programme trading reporting. See generative AI in financial services.

Core obligations under the programme trading rules in China

The futures framework deserves separate attention. Futures exchanges apply their own reporting procedures, definitions of high-frequency trading and monitoring standards, and futures companies are responsible for checking client systems before connection. Managers that run cross-asset strategies, such as index arbitrage between stock index futures and the underlying shares, should expect two parallel sets of reports and two monitoring perimeters.

How reporting works in practice

Although the exact forms are set by exchanges and brokers, the reporting process generally follows a predictable sequence:

1. Identify the reporting party. Determine which account holder or product is the investor of record, and which manager controls the strategy.
2. Collect the information. Typical items include account details, the funding source, the type of strategy, the order execution method, peak order rates and the trading software or system used.
3. Submit through the broker or futures company. The intermediary verifies the information and passes it to the exchange; in the futures market trading starts only after confirmation.
4. Maintain accuracy. Report material changes, such as a new strategy type, a new software system or a shift towards high-frequency activity.
5. Keep evidence. Retain testing records, risk control settings and change logs so that reported information can be supported if queried.

Additional points for high-frequency trading

Reaching the high-frequency thresholds is not prohibited, but it changes how an account is treated. High-frequency traders are expected to provide more detailed information about their systems and strategies, to show that their testing and emergency controls are robust, and to accept closer monitoring by the exchange. Exchange rules also address fees and the use of hosting and technical resources, reflecting the policy goal that faster participants should not gain unfair advantages over ordinary investors.

Because the securities thresholds count order submissions and cancellations together, strategies with high cancellation ratios can cross them even when executed volumes are modest. Managers should therefore model peak message traffic, not only trading volumes, when assessing whether programme trading rules in China treat a strategy as high-frequency.

Abnormal trading behaviour

According to Xinhua's report on the exchange rules, the stock exchanges identify four types of abnormal programme trading behaviour:

1. abnormally high instantaneous order submission rates;
2. frequent instantaneous order cancellations;
3. frequently pushing prices up or down, including small price movements across multiple stocks;
4. large volumes of trading in a short period.

For monitoring purposes, products managed by the same institution are aggregated. This means that a manager cannot avoid scrutiny by spreading activity across multiple funds or accounts. Behaviour that falls within these categories may lead to inquiries, warnings, restrictions on trading or, in serious cases, referral to the CSRC for investigation under the Securities Law. See securities compliance and CSRC enforcement.

Exchange responses are usually graduated. A first step is often an inquiry to the broker about the account's activity, followed by requests for explanations, oral or written warnings, and, if the behaviour continues, restrictions on the account's trading. Responses to these inquiries matter: inconsistent explanations, or explanations that contradict the information previously reported, can turn a routine monitoring query into a more serious matter. Managers should designate who answers exchange questions and keep a record of what was said.

A worked example

Consider a manager running three onshore products with the same market-making style strategy. Individually, none of the products comes close to 20,000 orders and cancellations in a day. On a volatile trading day, however, the combined order flow across the three products exceeds that level, and cancellation rates rise sharply in a handful of small-cap stocks. Because monitoring aggregates products run by one institution, the exchange may view the activity as high-frequency trading and as a possible abnormal pattern, even though each product's own controls were never triggered. Manager-level throttles and real-time aggregation would have flagged the issue before the exchange did.

Who is affected by programme trading rules in China

• Private quantitative fund managers. Many of China's largest private fund managers run quantitative strategies, and the rules sit alongside the asset management rules applied by the CSRC and the Asset Management Association of China. See private fund operations and compliance.
• Brokers and futures companies. They must collect and verify client reports, manage system access and monitor client trading, and are accountable for failures.
• Foreign investors. Qualified foreign institutional investors and investors using mutual market access schemes trading algorithmically are also within the regime, with reporting arrangements implemented through brokers and the relevant cross-border channels. See QFLP, QDLP and QFII schemes and market connectivity.
• Technology vendors. Providers of trading software, co-location and market data services must support client compliance and avoid conduct that undermines fair access.

Foreign investors trading through QFII or Stock Connect

Foreign investors sometimes assume that the regime is aimed only at onshore private fund managers. That is not the case. A QFII trading through a mainland broker reports through that broker in the same way as a domestic investor. Northbound investors trading through Stock Connect are covered through arrangements implemented by Hong Kong brokers and the cross-border channel, so the Hong Kong executing broker becomes the practical gatekeeper for reporting and monitoring.

For global managers, the main friction points are information requests about strategy logic, the need to identify the manager behind multiple accounts, and the treatment of execution algorithms supplied by global brokers. Each should be addressed in the account opening and execution documents rather than left to be resolved when an exchange query arrives. Fund managers should also consider whether investor disclosures explain how programme trading rules in China could restrict a strategy's capacity or turnover.

Programme trading rules in China compared with Hong Kong, the EU and the US

Global managers often ask whether controls built for other markets will satisfy the mainland framework. The principles overlap, but the mainland's emphasis on pre-trade reporting to the exchange, numeric high-frequency thresholds and aggregation across products is distinctive. The comparison below is a general orientation only.

In practice, an international manager can reuse much of its global control framework, such as kill switches, testing protocols and change management, but must add mainland-specific reporting, threshold monitoring and aggregation. Fund offering documents and investment management agreements should also disclose that mainland trading may be constrained by exchange measures.

Practical steps and common mistakes for quantitative managers

• Inventory every strategy, account and product that uses automated order generation, and confirm reporting status for each.
• Check whether any strategy could meet the high-frequency thresholds on peak days, not just on average days.
• Review kill switches, order throttles and cancellation controls, and keep test records.
• Align futures and securities compliance processes, because thresholds and reporting procedures differ between the two markets.
• Prepare an explanation of strategy logic that can be shared with brokers or exchanges without disclosing proprietary code unnecessarily.
• Review agreements with brokers and vendors to allocate responsibility for reporting accuracy and system failures.

Common mistakes under the programme trading rules in China include treating execution algorithms supplied by a broker as outside the regime, failing to update reports after a strategy change, monitoring thresholds per account rather than per manager, and assuming that Northbound access through Hong Kong removes mainland reporting obligations. Each of these can be corrected with modest investment in governance.

Market reports since July 2025 suggest that some managers have shifted research effort towards medium- and low-frequency strategies. Whether that trend continues will depend on how exchanges apply the rules in practice and on how the futures framework matures.

A phased compliance plan

The table below sets out a typical sequence for a manager that is starting to trade algorithmically in mainland markets or reviewing an existing set-up. Timing depends on the number of strategies and brokers involved.

How TRW & Co helps

We assist international asset managers, hedge funds, brokers and trading technology providers that trade, or plan to trade, Chinese securities and futures using automated strategies. We explain how the programme trading framework affects their strategies, review internal controls and documentation against international practice, negotiate broker, clearing and technology agreements, and advise on the laws of the jurisdictions in which our lawyers are qualified, including Hong Kong-facing arrangements. Where PRC legal advice, responses to exchange inquiries or engagement with the CSRC are required, we coordinate licensed PRC law firms. To discuss your trading set-up, please contact us.