China Tells Quants to Phase Out Strategy Blamed for Turmoil
- Regulators told funds to phase out existing DMA products
- Funds to cap leverage, suspend new product issuance: people
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Chinese regulators are taking steps to gradually shrink the size of a popular quantitative trading strategy that contributed to turmoil in the nation’s stock market this month, according to people familiar with the matter.
Some quantitative funds that manage “Direct Market Access” products for external clients were told to stop accepting new inflows and phase out their existing products, which typically use swap contracts and are often highly leveraged, the people said, requesting not to be named because they weren’t authorized to speak publicly. The gradual exit would help prevent drastic selloffs, the people said.