Saturday, September 28, 2013

Order cancellation limits on Chinese futures exchanges, solutions

I'm heading the desk here (Shanghai) on low latency trades on Shanghai Futures Exchange (SHFE), Chinese Financial Futures Exchange (CFFEX), and Dalian Commodity Exchange (DCE). Having read through all their trading rules documents the first week here, a lot of new information seems to surface still each day. For standard exchange participants, there is a daily order cancellation limit of 500 per account.

This is not so much of a bad thing, though it does give institutional outfits such as the firm I'm at a significantly large advantage over retail guys who attempt to dabble in low-latency trades, i.e. High Frequency Trading.


Getting following status at the exchanges would resolve the cancellation limit:
1) Arbitrageur entity
2) Commercial hedging entity
3) Exchange membership, these are usually State Owned Enterprises (SOE) in China.