Announcement of the China Securities Regulatory Commission
〔2024〕 No. 8
The Provisions on the Administration of Programmatic Trading in the Securities Market (for Trial Implementation) are hereby promulgated, which will come into force on October 8, 2024.
China Securities Regulatory Commission
May 11, 2024
Provisions on the Administration of Programmatic Trading in the Securities Market (for Trial Implementation)
Chapter I: General Provisions
Article 1 These Provisions are formulated in accordance with the Securities Law of the People's Republic of China (hereinafter referred to as the "Securities Law") and other relevant laws and regulations in order to strengthen the supervision of programmatic transactions in the securities market, promote the standardized development of programmatic transactions, and maintain the order of securities transactions and market fairness.
Article 2 The term "programmed trading" in these provisions refers to the act of conducting securities transactions on the stock exchange through the automatic generation or issuance of trading instructions through computer programs.
For the purposes of these Provisions, the term "programmatic trading investors" refers to the following investors who conduct programmatic transactions:
(1) Clients of securities companies such as private fund managers and qualified foreign investors;
(2) securities companies engaged in proprietary trading, market-making trading or asset management;
(3) Public fund managers, insurance institutions and other institutions that use the trading unit of the stock exchange to conduct transactions;
(4) Other investors recognized by the stock exchange.
Article 3 The activities related to programmatic trading shall comply with relevant laws and regulations, these provisions and the business rules of stock exchanges and industry associations, follow the principle of fairness, and shall not affect the security of the stock exchange system or disrupt the normal trading order.
Article 4 The China Securities Regulatory Commission (hereinafter referred to as the China Securities Regulatory Commission) and its dispatched agencies shall supervise and administer the activities related to programmatic trading in accordance with the law.
Stock exchanges, the Securities Association of China, and the Asset Management Association of China shall formulate business rules related to programmatic trading in accordance with their duties, and implement self-discipline management of activities related to programmatic trading.
Article 5 The China Securities Regulatory Commission shall guide the stock exchanges, the China Financial Futures Exchange, the Securities Association of China, the Asset Management Association of China, the China Securities Data Co., Ltd. and other units to establish a mechanism for the statistics and monitoring of programmatic trading information, and coordinate the implementation of cross-exchange and cross-market information sharing and monitoring of programmatic trading.
Chapter II: Report Management
Article 6 The stock exchange shall establish a programmatic transaction reporting system in accordance with the law.
Article 7 Programmatic trading investors shall report the following information truthfully, accurately, completely and in a timely manner:
(1) Basic account information, including the investor's name, securities account code, securities company designated for trading or custody, product manager, etc.;
(2) Account fund information, including the size and source of funds in the account, the scale and source of leveraged funds, the leverage ratio, etc.;
(3) Transaction information, including the type and main content of the trading strategy, the execution method of the transaction order, the maximum declaration rate, the maximum number of declarations in a single day, etc.;
(4) Information on trading software, including software name and version number, development entity, etc.;
(5) Other information required by the stock exchange, including securities companies, investor contacts and contact information, etc.
If there is a major change in the information reported by an investor in a programmatic transaction, a report on the change shall be made in a timely manner.
Article 8 The client of a securities company shall report the relevant information to the securities company entrusted by it in accordance with the provisions of the stock exchange and the provisions of the entrustment agreement for programmatic trading. After receiving the report information, the securities company shall verify the information reported by the customer in a timely manner in accordance with the regulations of the stock exchange. If the securities company verifies that it is correct, it shall confirm it to the customer in a timely manner and report to the stock exchange in accordance with the regulations. Clients can only conduct programmatic trading after receiving confirmation from the securities company.
If a securities company finds that the client fails to report as required or the report information is untrue, it shall urge the client to report in accordance with the regulations. If the correction is still not made after supervision, the securities company shall, in accordance with the provisions of the stock exchange and the provisions of the entrustment agreement, refuse to accept the entrustment and report to the stock exchange.
Article 9 Securities companies and public fund managers, insurance institutions and other institutions that use the trading units of the stock exchange to conduct transactions shall, in accordance with the provisions of the stock exchange, report to the stock exchange the relevant information on programmatic transactions, and only after confirmation by the stock exchange can they carry out programmatic transactions.
Article 10 The stock exchange shall confirm the reported information received in a timely manner, and carry out data screening on a regular basis, and compare the trading behavior of programmatic trading investors with the trading strategies and frequency of their reports.
The stock exchange may conduct on-site or off-site inspections of relevant institutions and individuals involved in programmatic trading, and conduct key inspections of relevant institutions and individuals that frequently report information and trading behaviors.
Chapter 3 Transaction Monitoring and Risk Management
Article 11 The stock exchange shall carry out real-time monitoring and control of programmed trading, and shall focus on monitoring the following abnormal trading behaviors that may affect the security of the stock exchange system or trading order:
(1) The number and frequency of declarations or cancellations in a short period of time reach a certain standard, or the number of declarations or cancellations within a few days reaches a certain standard;
(2) Large, continuous or intensive declarations and transactions in a short period of time, resulting in obvious abnormalities in the trading prices or trading volume of multiple securities;
(3) Large, continuous or intensive declarations and transactions in a short period of time, resulting in obvious abnormalities in the overall operation of the securities market;
(4) Other circumstances that the stock exchange deems necessary for key monitoring.
Programmatic trading abnormal transaction monitoring standards are set by the stock exchange.
Article 12 Where a securities company accepts the entrustment of a client's programmatic transaction, it shall sign an entrustment agreement with the client, stipulating the rights and obligations of both parties, and clarifying the management responsibilities and risk control requirements of the securities company to the client.
The Securities Association of China shall formulate and promptly update the model entrustment agreement for programmatic trading for the reference of securities companies.
Article 13 Securities companies shall strengthen the monitoring of customers' programmatic trading behaviors, conduct the review of programmatic trading entrustment instructions in strict accordance with the regulations of the stock exchange, promptly identify, manage and report the suspected abnormal trading behaviors of customers, and cooperate with the stock exchange to take relevant measures.
Article 14 Securities companies, public fund managers, private fund managers, qualified foreign investors and other institutions shall formulate special business management and compliance risk control systems for programmatic transactions, improve the review and monitoring system for programmatic transaction instructions, and prevent and control business risks.
Securities companies, public fund managers, private fund managers, qualified foreign investors and other institutions responsible for compliance and risk control personnel shall review, supervise and inspect the compliance of their institutions and clients' programmatic transactions, and be responsible for relevant risk management work.
Article 15 If an investor conducts programmatic trading and may cause major abnormal fluctuations or affect the normal conduct of securities trading due to force majeure, unexpected events, major technical failures, major human errors and other unexpected events, it shall immediately take measures such as suspending trading and revoking the entrustment. The clients of securities companies shall report to the securities companies entrusted by them in a timely manner, and other programmatic trading investors shall report to the stock exchange in a timely manner.
If a securities company discovers that a client has any of the circumstances described in the preceding paragraph, it shall, in accordance with the provisions of the entrustment agreement, take measures such as suspending its entrustment and revoking the relevant declaration, and report to the dispatched agency of the China Securities Regulatory Commission and the stock exchange in a timely manner.
The stock exchange shall clarify the specific procedures and requirements for taking measures such as technical suspension, temporary suspension of trading, cancellation of trading, and notification of suspension of delivery by the securities registration and clearing institution in response to the circumstances described in the preceding paragraph.
Chapter IV: Information Systems Management
Article 16 The technical system used for programmatic trading shall comply with the regulations of the stock exchange, and shall have effective functions such as capital verification and securities verification, authority control, threshold management, abnormal monitoring, error handling, and emergency response, so as to ensure safe, continuous and stable operation.
Programmatic trading investors using relevant technical systems shall conduct adequate testing in accordance with the requirements of the preceding paragraph and report test records in accordance with the provisions of the stock exchange.
Article 17 A securities company shall, in accordance with the regulations, carry out unified management of the trading unit, provide relevant services for all types of investors in accordance with the principles of fairness and reasonableness, and shall not provide special convenience for programmed trading investors.
Article 18 Where a stock exchange provides hosting trading custody services, it shall follow the principles of security, fairness and reasonableness, fairly distribute resources, and strengthen the management of entities using hosting services.
Securities companies shall, in accordance with the provisions of the stock exchange, reasonably use the hosting trading custody resources to ensure the fairness of transactions between different customers. Securities companies shall not provide hosting services to customers who frequently experience abnormal transactions, major technical failures in the programmatic trading system, or violations of the relevant regulations of the stock exchange.
Article 19 Where a securities company provides services for its customers' programmatic transactions through technical means such as access to the trading information system, it shall be included in the compliance risk control system, and establish and improve the whole-process management mechanism such as due diligence, verification testing, prior review, transaction monitoring, exception handling, emergency response, and exit arrangements.
Programmatic trading clients that are connected to the securities company's system shall not use the system to illegally operate securities business, solicit investors or process third-party trading orders in violation of regulations, and shall not transfer or lend their own investment and trading systems or provide system access to third parties in violation of regulations.
Securities companies that implement the access of the trading information system and programmatic trading customers that connect with the securities company's system shall comply with the relevant regulations.
Article 20 Programmed trading investors who use the value-added market information of the stock exchange shall pay fees in accordance with the regulations.
For programmatic transactions in which the number and frequency of declarations and cancellations reach a certain standard, the stock exchange may increase the fee standard, and the specific standard shall be stipulated by the stock exchange.
Chapter 5 Special Provisions for High-Frequency Trading
Article 21 The term "high-frequency trading" in these provisions refers to programmatic trading with the following characteristics:
(1) The number and frequency of declarations and cancellations in a short period of time are relatively high;
(2) The number of declarations and cancellations within a day is relatively high;
(3) Other characteristics identified by the stock exchange.
Stock exchanges shall clarify and improve the criteria for determining high-frequency trading in a timely manner.
Article 22 Before engaging in high-frequency trading, investors shall, in addition to the reporting information specified in Article 7 of these Regulations, also report the location of the server of the high-frequency trading system, the system test report, and the emergency plan in case of system failure.
Article 23 To adapt to the characteristics of high-frequency trading, the stock exchange may implement differentiated fees for high-frequency trading, appropriately increase the transaction fee standard, and may charge other fees such as order cancellation fees. The specific criteria and methods are prescribed by the stock exchange.
Article 24 The stock exchange shall implement key supervision over high-frequency trading. If a high-frequency trading investor has abnormal trading behavior, the stock exchange shall strictly manage it in accordance with regulations.
Chapter VI: Supervision and Management
Article 25 The stock exchange, the Securities Association of China and the Asset Management Association of China may, in accordance with the needs of self-discipline management, carry out interviews and reminders or on-site inspections of institutions and individuals related to programmatic trading.
If the relevant institutions and individuals of programmatic trading violate the requirements of the relevant regulations, the stock exchange, the Securities Association of China and the Asset Management Association of China shall take management measures in accordance with the regulations.
Article 26 The China Securities Regulatory Commission and its dispatched agencies may inspect or investigate the relevant institutions and individuals of programmatic trading in accordance with the law, and may entrust the relevant institutions to assist in carrying out assessment and monitoring, and the relevant institutions and individuals shall cooperate.
Article 27 If a securities company and its relevant personnel responsible for compliance and risk control fail to perform their duties such as compliance risk control and customer management related to programmatic trading, and violate the requirements of Articles 7, 8, 9, 12, 13, 14, 15, 16, 17, 28, 2, 19, 20 and 22 of these Provisions, the China Securities Regulatory Commission and its dispatched agencies may, in accordance with the Securities Law, the Regulations on the Supervision and Administration of Securities Companies, Measures for the Compliance Management of Securities Companies and Securities Investment Fund Management Companies" and other provisions shall take regulatory measures in accordance with the law.
Article 28 Where public fund managers, private fund managers, qualified foreign investors and other institutions and individuals related to programmatic transactions violate the requirements of Articles 7, 8, 9, 14, 15, 16, 19, 20 and 22 of these Provisions, the China Securities Regulatory Commission and its dispatched agencies may, in accordance with the Securities Law, the Securities Investment Fund Law, the Regulations on the Supervision and Administration of Private Investment Funds, Measures for the Administration of Domestic Securities and Futures Investment by Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investors" and other relevant provisions shall take regulatory measures in accordance with the law.
Article 29 If the relevant institutions and individuals of programmatic trading affect the security of the stock exchange system or the normal trading order, the China Securities Regulatory Commission and its dispatched agencies shall be punished in accordance with the provisions of Article 190 of the Securities Law. If it constitutes insider trading, trading with non-public information, manipulating the securities market and other illegal acts, it shall be punished in accordance with Articles 191 and 192 of the Securities Law. If the circumstances are serious, the relevant responsible persons shall be prohibited from entering the securities market in accordance with the provisions of Article 221 of the Securities Law.
Chapter VII Supplementary Provisions
Article 30 Investors who conduct programmed transactions in the Mainland securities market through the Stock Connect Mechanism between the Mainland and Hong Kong shall, in accordance with the principle of consistency between domestic and foreign investment, be included in the reporting management, implement the relevant provisions on transaction monitoring, and carry out cross-border regulatory cooperation on their abnormal trading behaviors. Other management matters shall be applied by reference to these provisions. The specific measures shall be formulated by the stock exchange.
Article 31 These Provisions shall be interpreted by the China Securities Regulatory Commission.
Article 32: These Provisions take effect on October 8, 2024.
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