China is yanking a critical edge from high-frequency traders, ordering the removal of their dedicated servers from local exchange data centers in a bid to curb volatility and level the playing field for retail investors amid surging markets.
The clampdown, revealed this week, targets commodities futures bourses including the Shanghai Futures Exchange (SHFE) and Guangzhou Futures Exchange, where regulators have instructed brokers to relocate client servers out of exchange-run facilities. High-speed trading clients must comply by the end of January 2026, while other users have until April 30, 2026, according to sources familiar with the matter. The move strips away the low-latency advantage gained by co-locating servers near exchange systems, which allows HFT firms to execute trades milliseconds faster than competitors.
Domestic quantitative hedge funds employing high-frequency strategies will feel the brunt, but the directive also impacts global players active in China, such as Citadel Securities, Jane Street, and Jump Trading. Regulators’ rationale centers on fostering market stability and fairness, especially after recent rallies pushed stocks to multi-year highs and amplified fluctuations in futures. High-frequency trading has long drawn suspicion in China, with authorities previously threatening fee hikes—though not implemented—to tame volatility.
The news rippled through commodities markets, sending metals prices tumbling. On the SHFE, copper slid 1.9% to 100,590 yuan ($14,435) a ton, while tin plunged 6.4%. Globally, the London Metal Exchange saw copper drop 1.6% to $12,901.50 a ton and nickel shed 2.6%, capping a week of dramatic swings fueled by earlier frenzied trading in Chinese futures. Analyst Jia Zheng of Shanghai Soochow Jiuying Investment Management Co. noted that while the measures could reduce intraday volumes and volatility, they won’t alter fundamental price directions, though HFT often “disrupts market rhythm.”
This isn’t Beijing’s first crackdown on trading practices; it follows efforts to manage risks in a market where retail investors, who suffered heavy losses in 2025 despite bullish conditions, often blame HFT for manipulation. In 2025, 81.1% of retail traders lost money, averaging 21,000 yuan ($3,014) each, with small accounts under 100,000 yuan ($14,355) seeing a 98.7% loss rate.
Globally, HFT regulations vary: The U.S. has debated speed bumps and transparency rules, while Europe imposes strict latency requirements under MiFID II. In China, where authorities prioritize control amid economic pressures like U.S. tariffs, this server purge could slow trading volumes but risks deterring foreign capital from its burgeoning futures markets. As metals like copper and lithium face demand headwinds, the clampdown underscores Beijing’s balancing act between innovation and stability in a high-stakes trading arena.
