China is pulling the plug on a key advantage held by high-frequency traders, removing servers dedicated to those firms out of local exchanges’ data centers, according to people familiar with the matter. Commodities futures exchanges in Shanghai and Guangzhou are among those that have ordered local brokers to shift servers for their clients out of data centers run by the bourses, according to the people, who said the move was led by regulators. The change doesn’t only affect high-frequency firms but they a ...

Core Insights - High-frequency traders utilize low-latency trading algorithms to execute and cancel orders at extremely fast speeds, often within 20 milliseconds, which allows them to engage in anticipatory trading and create arbitrage opportunities in the E-mini S&P 500 and SPDR S&P 500 ETF Trust [1] - These trading strategies enable high-frequency traders to earn significant profits after accounting for transaction costs, while other market participants without similar technology face higher execution costs [1] - The study suggests implementing batch auctions as a policy measure to reduce queuing risk for high-frequency traders, which could improve overall market quality [1]