Chinese regulators have announced plans to enhance oversight of direct market access (DMA), a popular strategy in quantitative trading known for being highly leveraged. This move comes in response to a report from Bloomberg suggesting that regulators were considering phasing out this strategy.
Market Response
The benchmark Shanghai Composite Index closed 1.9% lower at 2957.85, with the CSI300 down 1.3% on the day following the initial report.
Regulatory Statement
In response to the media report, the China Securities Regulatory Commission (CSRC) issued a statement emphasizing the importance of reducing leverage in the DMA business. The statement highlighted the need to prevent and control market risks to maintain a stable and healthy market environment.
Increased Oversight
The CSRC outlined plans to increase oversight of over-the-counter derivatives business, including DMA, to ensure that the industry maintains appropriate levels of business scale and leverage.
Industry Trends
According to the CSRC, the scale of DMA business has been gradually decreasing since the Lunar New Year holiday. Data from the China Securities Inter-Agency Quotation System indicated that the average daily trading volume for this sector accounts for approximately 3% of the total market turnover.
Continued Efforts
This latest regulatory announcement is part of a series of measures aimed at boosting investor sentiment in China’s stock markets. Recent actions have included restrictions on net sales and suspending restricted share lending to curb short selling. Additionally, there have been changes in leadership within the markets regulatory agency.
