Dutch high-frequency trader under China stock-index probe

Dutch high-speed trading firm IMC BV is being investigated by authorities in China for its activities in the country's stock-index futures market last year.

The firm has received inquiries from the China Securities Regulatory Commission related to futures trading at its Shanghai-based affiliate, said IMC spokesman Ian Bickerton. Discussions between IMC and the regulator have been constructive and positive, Bickerton said.

The CSRC didn't reply to a fax seeking comment.

"IMC has confirmed with external counsel that its futures trading activity in China complied with all applicable regulations and exchange rules," Bickerton said.

"IMC is very confident that, after reviewing the information provided by IMC, the CSRC will resolve its inquiries positively."

The probe is the latest example of China's crackdown on high-speed traders in the wake of last year's market rout. Yishidun International Trading was earlier this month charged with manipulation by prosecutors in Shanghai. Also a draft rule on automated trading that would be among the strictest in the world was published late last year. The draft was reportedly put on hold, though the regulator has yet to comment.

China's $6.5 trillion equity market is free from high-frequency trading, because buying and selling a stock on the same day is banned. But some derivatives contracts, including stock-index futures, are available to super-fast traders, whose interest helped China's index futures market briefly become the world's biggest last year.

Regulators blamed the heightened activity for helping fuel the stock boom and subsequent bust, and in response imposed curbs that cut volume by 99 percent. The curbs remain in force, though regulators are said to be planning on easing them.

Shanghai prosecutors said on Aug 4 they have charged Yishidun with a criminal case likely to begin in the next three months. Yishidun is alleged to have self-traded and also placed large batches of orders far away from the market price, the Xinhua News Agency reported in November, citing the Shanghai police.

The hearings are expected to offer a view into how Chinese authorities view high-frequency trading. A spokesman for Yishidun said the firm "is ready to defend its position in court when required to do so".

Bloomberg