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China's high-frequency traders will face additional transaction fees in draft rules published on Friday by the country's exchanges, as regulators tighten scrutiny on the sector to revive retail investor confidence.
The details unveiled by the Shanghai and Shenzhen stock exchanges come after the country's securities regulator published rules last month to increase oversight on program trading.
"The exchange may implement differentiated fees for high-frequency trading, set fees based on indicators including the number of submitted and withdrawal orders and frequency, and charge additional fees such as traffic fees and withdrawal fees," according to the stock exchanges.
For one single account, the draft rules define over 300 order submissions and cancellations within a second or over 20,000 such transactions in a day as high-frequency trading.
Funds that are trading at excessive high frequency are taking advantage of small investors and disrupting asset pricing, said Yuan Yuwei, founder and chief investment officer of Water Wisdom Asset Management.
"So, I'm in favor of the regulation to draw a line on high frequency trading," Yuan said.
The crackdown on funds using statistical models and computer algorithms to make trading decisions follows a February market crash dubbed China's "quant quake", reminiscent of a machine-driven 2007 Wall Street selloff that preceded the global financial crisis.
China's blue-chip stocks has since gained roughly 12%.
(Reporting by Shanghai Newsroom; Editing by Sriraj Kalluvila)