China curbs high-speed trading by stripping exchange server access, algo trading hit

China is taking steps to rein in high-speed trading by removing the access of trading firms to servers housed in exchange data centers. This decision by regulators primarily affects high-frequency trading firms due to their reliance on minimal latency. Trading exchanges in Shanghai and Guangzhou have mandated that these client servers be relocated by the end of next month, with a broader deadline extending to April 30 for other clients. This measure will impact both domestic quantitative funds and global players such as Citadel Securities and Jane Street. By enforcing this move, authorities are seeking to minimize the latency advantage that high-frequency traders have enjoyed near matching engines. The clampdown comes as regulators are tightening rules surrounding margin trading and increasing scrutiny on foreign market-making activities. The goal is to level the playing field and enhance market stability after a significant rally in Chinese equities and futures. While high-frequency traders play a role in providing liquidity, concerns over their trading advantages have led to this renewed regulatory focus. As a result, this could reshape trading strategies and market dynamics significantly.