China is taking decisive steps to curb the speed advantage enjoyed by high-frequency trading (HFT) firms, ordering servers used by these traders to be removed from data centers operated by local exchanges. The move, reportedly led by regulators, is set to reshape trading dynamics for both domestic and global players active in the country.
Commodities futures exchanges in Shanghai and Guangzhou are among those instructing local brokers to relocate client servers. According to people familiar with the matter, the Shanghai Futures Exchange has given brokers a deadline: high-speed trading clients must move their equipment by the end of next month, while other clients have until April 30. Shenzhen-based brokers are also reportedly adjusting their setups for high-frequency clients.
The clampdown directly targets HFT firms, known for using ultra-fast servers to gain milliseconds of execution advantage—a critical edge in markets where speed determines profit. While the change affects all clients, high-frequency traders are expected to feel the most significant impact.
Global firms such as Citadel Securities, Jane Street Group, and Jump Trading are among those whose server access will be disrupted, according to the sources, who requested anonymity due to the private nature of the matter. The move will also challenge China’s domestic HFT industry, which has grown to manage assets estimated at 1.7 trillion yuan ($244 billion) as of mid-2025, according to Citic Securities.
High-frequency trading has long been a controversial component of modern markets. Firms employ sophisticated algorithms to capitalize on the smallest price movements, often leveraging co-location services—placing their servers as close as possible to exchange systems to minimize latency. While this adds liquidity to markets, it also creates disparities, as ordinary investors cannot compete with such rapid execution.
“High-frequency traders may adjust their strategies and are likely to reduce their trading frequency in the short term, thus reducing brokerage fees and server hosting costs,” said Shen Meng, director at Beijing-based investment bank Chanson & Co. “But they will continue to design new solutions in the future,” he added, suggesting that innovation in speed trading is unlikely to disappear entirely.
In addition to moving servers, exchanges have reportedly considered adding a fixed delay of two milliseconds for connections from third-party computer rooms. While imperceptible to most investors, even such a small delay could disrupt high-frequency strategies in stock index futures, convertible bonds, and commodities trading. Analysts note that some strategies may become unviable if access speeds are significantly reduced.
The regulatory push aligns with Beijing’s broader efforts to ensure market stability and a level playing field for investors. Earlier this week, authorities tightened rules on margin trading to curb leveraged bets, and they have also scrutinized certain ETF trades by foreign market makers. These moves follow a stock market rally to multi-year highs, prompting regulators to act to prevent excessive volatility.
Markets reacted quickly to the news. The CSI 300 Index, which had gained nearly 1% prior to the announcement, slid into negative territory. On the Shanghai futures exchange, copper futures fell roughly 1% after earlier gains of 0.6%, highlighting the immediate impact on sentiment.
High-frequency trading in China is defined as accounts placing more than 300 orders and cancellations per second or exceeding 20,000 requests in a single day. Such accounts have declined by roughly 20% in 2024, reaching about 1,600 by mid-year, according to the China Securities Regulatory Commission. The regulatory trend reflects Beijing’s cautious stance toward HFT, which it has monitored for years.
In 2024, regulators imposed stricter rules on automated stock trading, while also threatening to increase fees for high-frequency traders, though such fee hikes have not yet materialized. These measures are part of a longer-term strategy to balance liquidity provision with fairness, ensuring that retail investors and smaller firms are not disadvantaged by sophisticated algorithmic players.
The move also signals China’s awareness of global trends. Other markets, including Thailand’s stock exchange, have recently tightened HFT rules to bolster investor confidence and prevent volatility driven by ultra-fast trading. Analysts note that while HFT contributes to efficient price discovery, excessive speed advantages can undermine market integrity.
For global firms operating in China, adapting to the new environment will be critical. Companies like Tower Research Capital, Optiver, Jump Trading, and Jane Street have historically leveraged their technological edge to outperform local players, particularly in futures markets. With server relocation and potential latency delays, some strategies may need reengineering, while others could be abandoned entirely.
The exact timing and implementation details of these changes may vary across exchanges and brokers, creating further uncertainty for market participants. Nevertheless, Beijing’s push is clear: the era of ultra-fast trading with preferential access to exchange servers is being curtailed, at least temporarily.
As the deadlines approach, HFT firms and brokers will be closely monitoring the situation, seeking ways to maintain competitiveness while complying with regulatory requirements. The coming months are likely to reveal whether China’s interventions will reshape trading dynamics permanently or merely trigger a new wave of technological innovation in pursuit of speed.
