Chinese regulators have mandated the shutdown and removal of 148 high-frequency trading data servers from major exchange colocation facilities, signaling a major escalation in oversight of algorithmic trading. The move targets infrastructure enabling sub-millisecond trade execution, affecting key domestic and foreign market participants.
- 148 data servers removed from exchange colocation centers in China
- 32 domestic and 11 foreign firms implicated in high-speed trading infrastructure
- 78% of affected servers located in Tier-1 exchange facilities in Shanghai and Shenzhen
- 23 suspicious trading events identified in 2024 involving high-frequency manipulation
- 18% decline in SSE 50 Index trading volume post-removal
- Shift in strategy observed among foreign asset managers toward Hong Kong and Singapore
Chinese financial authorities have initiated a sweeping enforcement action against high-speed trading infrastructure, requiring the immediate removal of 148 data servers located within exchange data centers across Shanghai, Shenzhen, and Beijing. The directive, issued by the China Securities Regulatory Commission (CSRC) in late December 2025, cites risks to market stability and unfair advantages linked to co-location privileges and ultra-low latency systems. The affected servers were primarily associated with 32 domestic proprietary trading firms and 11 foreign institutional investors, including hedge funds and asset managers operating under Qualified Foreign Institutional Investor (QFII) licenses. These servers facilitated algorithmic strategies that exploit microsecond-level time differentials in trade execution, a practice regulators argue undermines fair market access and contributes to volatility during high-impact news events. Regulators highlighted that 78% of the servers were housed in Tier-1 colocation facilities near the Shanghai Stock Exchange and Shenzhen Stock Exchange, where proximity to exchange matching engines offers a competitive edge. The CSRC's enforcement action follows a series of internal audits that revealed 23 trading events in 2024 involving abnormal order flow patterns indicative of high-frequency manipulation, including quote stuffing and spoofing. Market participants anticipate broader implications, with trading volumes in the SSE 50 Index dropping 18% in the week following the server removals, as high-frequency firms recalibrate their operations. The move also prompts re-evaluation of co-location contracts and infrastructure investments by global asset managers, with at least three major U.S.-based hedge funds announcing plans to shift focus to alternative liquidity venues in Hong Kong and Singapore.