Currently, there are two completely different voices in the A-share market regarding quantitative trading.

Firstly, there are small and medium investors who are strongly demanding the prohibition of quantitative trading.

Secondly, there are speculative institutions and brokers both domestically and internationally who strongly oppose the prohibition.

Small and medium investors are demanding the prohibition because quantitative trading has completely destroyed the principle of fair market trading. As the main body of the market, small and medium investors are mercilessly harvested by AI, with a level of cruelty that has never been seen in the history of A-shares.

Advertisement

Speculative institutions and brokers oppose the prohibition because they rely on strong computing power and frequent transactions to repeatedly buy and sell high and low, and can obtain good returns even when the market continues to decline. Brokers can also increase their income due to quantitative trading; they also believe that quantitative trading can provide liquidity to A-shares.

The impact on the A-share market is mainly reflected in the following aspects:

1. Trading volume and activity: Quantitative trading can provide a certain amount of liquidity to the market and increase the activity of the stock market. Because quantitative trading can make buy and sell decisions quickly, it has to some extent promoted the market's trading volume.

2. Competitive landscape: The development of quantitative trading has made the competition among professional institutions more intense. In order to gain an advantage in the market, each institution needs to compete in professionalism, focus, specialization, and extreme. Individual retail investors may feel that stock trading is becoming more and more difficult when facing quantitative trading.

3. Market volatility: A moderate amount of quantitative trading can provide a certain amount of liquidity to the market, but if the proportion of quantitative trading is too large, it may increase the short-term market volatility. Because quantitative trading usually adopts high-speed trading and algorithmic strategies, this may lead to an increase in market instability.4. Regulatory Challenges: With the development of quantitative trading, regulatory authorities face more challenges. How to ensure market fairness, prevent risks, and combat market manipulation and other behaviors has become an important issue that regulators need to focus on.

In summary, quantitative trading has had a certain impact on the A-share market, but the specific extent of the impact still needs to be assessed in conjunction with various factors such as the market environment and regulatory policies. In China, quantitative trading is still in its infancy and has a lot of room for development compared to overseas mature markets. Investors should maintain a rational and cautious attitude when facing quantitative trading and make decisions that are responsible for their wealth.

Quantitative Trading Dilemmas in the A-Share Market

For many stock investors, quantitative trading has become a dilemma.

Firstly, some quantitative traders exploit loopholes in market rules and adopt strategies that are detrimental to retail investors, such as short-term trading. Such behavior often affects market stability, making it difficult for ordinary retail investors to grasp the rhythm of the market, ultimately leading to losses.

Secondly, in the A-share market, most investors are retail investors who usually lack professional financial knowledge and trading skills, making them more susceptible to market fluctuations. Some quantitative traders take advantage of this by designing trading strategies targeting retail investors to maximize their profits. This behavior undoubtedly intensifies the dissatisfaction and resistance of retail investors towards quantitative trading.

Furthermore, some large capital teams in the market will also spread specific trading strategies and tactics to retail investors through online platforms. These strategies are often designed to meet the needs of quantitative trading. Retail investors may unconsciously become part of the quantitative trading strategy in the process of learning and practicing these strategies, making them more susceptible to the influence and control of quantitative trading.

Under such circumstances, retail investors feel helpless and confused. The tactics and strategies they study every day may be fabricated by those large capital teams for their own interests. It is like being in a game where the rules and props are set by the opponents, making it difficult for retail investors to win.

In the A-share market, small investors are the main body, which is completely different from other overseas markets. It is only natural to protect the interests of the main body of the market. If unfair trading rules make the main investors fearful and even suffer heavy losses, then participants will leave the market. The current situation is also like this, with an increasing number of account cancellations in the A-share market. Even if there are no cancellations, the accounts are basically in a dormant state. This is extremely terrifying, as the saying goes, "Water can carry a boat, but it can also overturn it." This is an eternal truth.High-frequency trading is essentially a thorough and complete speculative behavior. It does not provide liquidity; instead, it creates panic through repeated harvesting, and this liquidity is fake and pseudo-liquidity. It is precisely because quantitative trading has caused the continuous exit of small and medium investors, who constitute the main body of the market, that has led to the depletion of liquidity. Deceiving the market participants with the wrong and the black and white reversal cannot deceive the real market participants. The management should not be blinded by bad institutions and "experts." Thirdly, the so-called quantitative trading is an inevitable result of the development of artificial intelligence, which is even more wrong. The development of AI is to benefit mankind, and controlling the excessive development of AI is a consensus of the whole world and all mankind. When the development of AI in a certain field endangers mankind, it must be resolutely controlled. If it is allowed to grow wildly, the consequences are unimaginable. The current quantitative trading in A-shares has indeed greatly harmed the normal survival of small and medium investors and endangered the health and stability of A-shares.

However, the introduction of a combination of policies such as reducing stamp duty, controlling the pace of IPOs, and strictly limiting the reduction of major shareholders also fully explains the high level of care for the stock market by the regulatory authorities, which is essentially a "should be out" favorable policy. However, looking at the subsequent market performance and the effect of making money, the performance of A-shares is somewhat less than market expectations. The root cause is that the market generally believes that quantitative trading is the "root of the disaster."

In fact, the basis for judging whether quantitative is a blessing or a disaster can be very simple, as long as it is beneficial to the A-share market and whether it affects the stockholders to make money. In recent years, the fluctuation range of A-share indices has become smaller, and it is easier to fall and harder to rise, and stockholders generally reflect that it is increasingly difficult to make money in A-shares. Compared with the past A-shares, the biggest variable is actually the rise and development of quantitative trading. Under this background, it is very necessary for the regulatory authorities to regulate quantitative trading.

At the current stage of the A-share market, some quantitative trading has become distorted and has even caused serious damage to the A-share ecology. The mainstream view is that some quantitative trading has completely deviated from value investment and has become a machine for repeatedly harvesting leeks within a man-made range, making it difficult for stocks to reflect the real market value. Some investment institutions even use the guise of quantitative trading to do business of raising stock prices within a day and short-selling, which is suspected of manipulating stock prices.

Looking at the performance of the A-share market in recent years, whether it is the dazzling data of the economic basic plate or the introduction of policy benefits beyond expectations, it is difficult to let A-shares go out of a decent one-sided rise, and the reason behind it is likely to be related to quantitative trading. After all, for emotionless quantitative investment strategies, high opening and smashing the plate, and then making up at a low position, is the only instruction given by the code, without exception.

However, quantitative investors feel very wronged, thinking that it is actually quantitative that provides a large amount of liquidity for A-shares, and quantitative is the backbone of A-shares. It is a fact that quantitative investment provides liquidity, but the liquidity brought by quantitative is mostly false prosperity, which is a necessary condition for it to complete its own repeated harvesting of leeks and make profits, and it does not actually create any investment value for A-shares, which does not need to be self-praising.

The proportion of individual investors in A-shares is relatively high, and competing with quantitative trading, retail investors have almost no chance of winning. In the long run, the end of retail investors can only be continuous losses, and the less there is a money-making effect, the less there will be stockholders entering the market, which is a vicious cycle.

Quantitative trading should complement value investment, but now it has become a tool for a few institutions to "shear sheep" with high-frequency trading, which is not the backbone of A-shares, but will be criticized by stockholders.

In fact, there is no right or wrong in quantitative trading itself. If the A-share market wants to become more international, quantitative trading is indispensable. The regulatory authorities regulate quantitative trading to better develop steadily and in compliance in the future, not to "ban" it. At present, the intervention of the regulatory authorities is more like a stress test, and the ultimate goal is to let the market give an answer to whether quantitative is a blessing or a disaster, and to find the critical point of harmonious coexistence between quantitative investment and the A-share market.What should be done? Where is the way out for retail investors?

Facing the challenge of quantitative trading, retail investors need to enhance their financial literacy and trading skills, learn to analyze the market rationally, and avoid blindly following the trend. They cannot always be led by the nose by the market; they need to maintain rationality and calmness, and not be confused by superficial fluctuations.

At the same time, regulatory authorities should also strengthen the supervision of quantitative trading to ensure the fairness and stability of the market and protect the legitimate rights and interests of the majority of investors. We cannot allow a few people to manipulate the market for their own interests, damaging the interests of the majority of retail investors.

Quantitative trading was introduced from the United States, but the U.S. is mainly dominated by institutional investors, and the stock price trend is relatively stable. A-share retail investors are numerous, and stock prices have higher volatility, which is more suitable for quantitative fund trading. Therefore, despite the sluggish trend of the secondary market, quantitative funds are making a fortune, which forms a huge contrast with active equity funds. Therefore, for quantitative trading, the principle of mandatory disclosure should be adhered to, requiring quantitative funds to disclose in detail the stock structure and hedging methods of program trading, effectively eliminating under-the-radar trading. The Securities Regulatory Commission guides the stock exchanges to implement the reporting system for program trading.

In summary, for quantitative trading, we should neither "deify" nor "demonize" it. Quantitative investment is based on the retrospective of historical data, so quantitative strategies are more adept at playing advantages in market environments with strong continuity. Most quantitative strategies have actually maintained a stable and extremely high stock holding ratio, which can be said to be an important force in stabilizing the market. Therefore, attributing the market's decline or high volatility entirely to quantitative trading, I believe, is irrational.

Quantitative trading is just a tool, and the key lies in how to use it. We need more perfect and fair market rules, as well as a more rational and mature investor group, to jointly promote the healthy development of the market. Otherwise, quantitative trading can only become a tool for a few people to cut leeks, rather than a sharp weapon to benefit the stock market and investors.