China curbs ‘flash boys’ access to exchange data, sources say

Core Viewpoint - The China Securities Regulatory Commission (CSRC) has mandated the removal of client-dedicated servers from local exchange data centers, impacting high-frequency trading and aiming to create a level playing field for all investors [1][3]. Group 1: Regulatory Changes - The CSRC's recent directive targets both Chinese and foreign high-frequency traders, indicating a significant regulatory shift in the trading landscape [3]. - This measure is part of broader efforts by the CSRC to discourage market speculation and protect small investors amid concerns of a potential boom-and-bust cycle following a significant market rally [2][4]. Group 2: Market Impact - The removal of client-dedicated servers is expected to disrupt the high-frequency trading industry, which has attracted foreign firms like Citadel Securities and Jane Street Group [2][4]. - The Shanghai Composite Index recently reached decade-highs, with record turnover and leverage trades, highlighting the current market volatility and speculative environment [7]. Group 3: Exchange Operations - Major exchanges in China, including those in Shanghai, Dalian, Zhengzhou, and Guangzhou, are affected by the CSRC's guidance, which applies to all significant exchanges overseen by the commission [5]. - The directive aims to eliminate advantages previously held by high-frequency traders due to their proximity to exchange data centers [4].