A regulatory notice raises the question

According to reports, securities exchanges required brokers to remove, within three months, clients’ dedicated trading equipment housed in brokers’ server rooms. The equipment belonged to large high-frequency quant-trading clients who had connected their own trading servers directly into brokers’ server rooms to get market data and execute orders faster — in effect gaining information and speed advantages ordinary investors could never match.

Not “technical leadership” but potentially a crime

During the abnormal A-share volatility of 2015 there was a clear precedent: two foreign nationals colluded with insiders at a futures company to connect their trading equipment to a broker’s server room, and used that illegally obtained advantage to profit heavily in the stock index futures market at order speeds far beyond normal (an average of 31 orders per second). The company involved had RMB 389 million of illegal gains confiscated and was fined RMB 300 million, and those responsible were sentenced to five years’ imprisonment for futures market manipulation and embezzlement respectively.

Where the problem lies

Ordinary investors and quant institutions already differ objectively in access to information and order speed. But gaining a “front-running” advantage by colluding improperly with exchange or broker insiders to plug equipment into their server rooms goes beyond technical capability: it is market manipulation that undermines fair trading and makes illegal profits, and it violates the Criminal Law.

A reminder for ordinary investors

Ordinary investors are at an absolute disadvantage in information, speed and capital, and betting against professional institutions — or even capital suspected of illegal manipulation — is extremely risky. Rather than trying to catch up with such unfair advantages, ordinary people should recognise their position in the game and carefully assess the risks of trading in the secondary market.

How Wang Xin’s team can help

  • Defense in securities and futures offences
  • Representation in market manipulation and insider trading cases
  • Financial compliance advice
  • Investor rights protection

For legal questions about securities and futures, contact Wang Xin: phone +86 186-0113-9509, WeChat wang223040.

Quick answers

Is high-frequency trading illegal in China?
Not in itself. But obtaining speed or information advantages through improper collusion with exchange or broker insiders — such as plugging your equipment into a broker’s server room — can be criminal market manipulation.
What happened in the 2015 colocation manipulation case in China?
Two foreign nationals colluded with futures company insiders to connect their equipment to a broker’s server room and traded stock index futures at about 31 orders per second. RMB 389 million was confiscated, a RMB 300 million fine imposed, and individuals were sentenced to five years for futures market manipulation and embezzlement.

This is an English edition of Wang Xin’s original Chinese article, 把炒股设备放进券商机房，是犯罪行为吗？. It explains the law of the People’s Republic of China in general terms and is not legal advice for any particular case; outcomes depend on the specific facts and on how local authorities apply the rules.