China's Quant Funds Outperform Foreign Rivals Despite Speed Restrictions
SCMP · 1 SOURCESabout 2 hours ago2 MIN
Summary
China's quantitative funds have built trading strategies so closely tailored to the mainland market that foreign rivals cannot replicate them, even as Beijing tightens restrictions on trading speed, according to economist Xia Chun, founder of Wiselink Group. On the night of July 31, stock exchanges in Shanghai and Shenzhen eliminated the dedicated local-network queues that allowed quant funds' co-located servers to receive price feeds tens to hundreds of microseconds ahead of other participants. The move achieved what US regulators have sought—and failed—to accomplish for years.
Key Points
- Xia Chun, founder and chief economist at Wiselink Group, says top US quant teams can beat native quants in Japan or India but cannot beat Chinese quants on the mainland
- China's unique valuation logic for state-owned enterprises creates pricing dynamics that traditional foreign models fail to capture
- Administrative policy interventions such as IPO suspensions and policy-driven trading halts become trading signals that outside models struggle to replicate
- On July 31, Shanghai and Shenzhen stock exchanges cut dedicated local-network queues giving quant funds microsecond speed advantages
- Xia, who has advised the China Securities Regulatory Commission, says China may conduct further speed cuts if the change makes markets fairer
Why It Matters
The regulatory intervention signals Beijing's willingness to use administrative power to reshape financial markets in ways Western regulators have been unable to achieve, potentially setting a precedent for market governance. Chinese quant firms are already redirecting capital into hosting space closest to exchange servers, suggesting the industry will adapt rather than disappear despite tighter controls.
The regulatory intervention signals Beijing's willingness to use administrative power to reshape financial markets in ways Western regulators have been unable to achieve, potentially setting a precedent for market governance. Chinese quant firms are already redirecting capital into hosting space closest to exchange servers, suggesting the industry will adapt rather than disappear despite tighter controls.