Asian regulators risk stifling trading activity and negatively impacting market liquidity as they intensify their oversight of strategies popular among hedge funds in a bid stabilise slumping markets, according to a report by Bloomberg.
Thailand has introduced increased scrutiny on high-frequency trading (HFT), effective Monday, following China’s impending real-time monitoring of programmed trading. While authorities expect these measures to enhance transparency, there are concerns that they might reduce liquidity and make these markets less attractive overall.
In South Korea meanwhile, a short-selling ban has complicated the country’s bid for an MSCI Inc upgrade.
China’s crackdown on quantitative trading began in February when the stock market hit multi-year lows. With state fund purchases providing support, shares rebounded but started to fall again in late May.
Thailand’s SET Index has dropped about 8% this year, making it one of the region’s poorest performers. The stock exchange will now require high-frequency traders to register before placing orders, as part of a broader raft of measures aimed at restoring market calm amid concerns over illegal short selling, programme trading, and corporate scandals.
Market watchers though, have warned that these restrictions could chill trading activities and harm governments’ reputations. China’s quantitative hedge funds saw asset declines in the first quarter, the first drop since late 2022, according to Citic Securities Co.
In South Korea, quant funds are seeking opportunities elsewhere as the government extended the short-sale ban through March 2025.
