Thailand’s plan to extend scrutiny on high-frequency trades — in impact from Monday — follows steps from China, the place programmed buying and selling will quickly be topic to real-time monitoring. While authorities anticipate the strikes to boost transparency, the growing management over sure trades has raised concern that liquidity could tighten and make these markets total much less enticing.
“The current trend of regulators tightening the regulation of high frequency trading is somewhat understandable but also worrying,” mentioned Gary Dugan, chief government officer of the Global CIO Office. “The activity of the HFT funds also brings liquidity to the markets – better liquidity should lead to the improvement in the efficient pricing of assets.”
The controversial nature of such restrictions is on full show in South Korea, the place a short-selling ban harm its makes an attempt to win an improve from MSCI Inc. These developments present the difficulties policymakers have in maintaining with more and more subtle buying and selling methods and their impression on monetary markets, a problem that’s solely set to develop with the adoption of synthetic intelligence.
The restrictions, sometimes launched when inventory markets had been underneath stress, have managed to cease the bleeding however their longer-term impression is underneath debate given the expansion of computer-aided buying and selling.
Quantitative methods are based mostly off information science and systematic methods, with some utilizing massive information to time markets, observe traits or execute arbitrage trades.
China’s clampdown on quant buying and selling got here in February when the inventory market was at multi-year lows. With the added assist from purchases by state funds, shares staged a rebound however have began to fall once more since late May.
Thailand’s SET Index has fallen about 8% this yr, turning it into one of many area’s worst nation benchmarks. The inventory alternate mentioned it’ll require high-frequency merchants to register earlier than they’ll place orders. The measures are a part of a bundle of guidelines to revive calm amid concern over the impression of unlawful short promoting, program buying and selling and company scandals.
“Policymakers in these markets might view volatility as the primary culprit for underperformance,” mentioned Hebe Chen, an analyst at IG Markets Ltd. “In smaller markets like Malaysia, where the combination of performance and volatility is more similar to China and Korea, the odds of creating their own safety net can’t be ruled out.”
Chen added that international locations which are extra carefully linked to international buyers, comparable to Japan and Singapore, are unlikely to use such restrictions as they search to align with the “universal rules of the game.”
ETMarkets.comAs restrictions look set to remain for now, market watchers warn of a chilling impression on buying and selling actions and a possible blow to the governments’ popularity.
China’s quantitative hedge funds noticed their property drop within the first quarter for the primary time since late 2022, based on estimates by Citic Securities Co.
In South Korea, quant funds are eyeing elsewhere as the federal government prolonged the short-sale ban via the tip of March 2025.
“As it became impossible to employ various strategies in South Korea, they are saying good-bye to the South Korean market and doing arbitrage trades instead in Japan and Hong Kong,” mentioned Jung In Yun, chief government officer at Fibonacci Asset Management Global Pte.
To make certain, some have welcomed the restrictions as they’ll cut back short-term speculative trades. George Molina, head of buying and selling for Templeton Global Investments, mentioned the principles are “needed to adjust for what were arguably loopholes in the system.”
It’s a view echoed by Wei Li, multi-asset quant options portfolio supervisor for BNP Paribas Asset Management, who mentioned such measures can contribute to a extra secure and clear market surroundings and in the end profit all contributors.
Governments in superior international locations together with the US and Europe have additionally resorted to momentary restrictions in instances of economic stress, such because the 2008 ban on short promoting of economic shares within the US and varied curbs on the onset of the pandemic.
The “ultimate impact” will rely on how effectively rules are balanced to guard buyers with out stifling market effectivity and innovation, mentioned Charu Chanana, a strategist at Saxo Markets. “AI can lead to more algorithmic trading that remain prone to sudden and extreme market movements. Regulation in Asia will likely be slow to respond to developments in AI, and precautionary measures may therefore remain more stringent.”