New York (HedgeCo.net) – As the Chinese stock market has continued to experience volatile trade, China’s securities watchdog continues to consider actions to stabilize stocks. The latest practice that is under the microscope is automated trading.

Actions have already included having various state-sponsored entities purchasing stocks in an attempt to halt falling prices, halting stock trading when they were too unstable and essentially declaring war on short selling.

No the China Securities Regulatory Commission is investigating firms that employ automated trading and in particular firms that frequently cancel bids. In an interview with Reuters, Wang Feng, chief executive of the hedge fund Alpha Squared Capital, explained what the regulators were looking at. “The CSRC is only targeting those who use program trading to frequently submit and then cancel bids, thus disturbing the market and manipulating prices,” he said. “Such a practice is closely watched by regulators in the U.S. as well.”

Apparently the CSRC found 24 accounts they deemed as having abnormal levels of canceled bids and these accounts have been suspended until October 30.

Rick Pendergraft
Research Analyst
HedgeCoVest