Northbound HFT Reporting

This week’s newsletter is most suitable for folks working in high-frequency trading (HFT) compliance specifying various considerations related to HKEX and Mainland China.

Background

“Effective 7 July 2025, the Shanghai (SSE), Shenzhen (SZSE), and Beijing stock exchanges imposed reporting and risk control requirements on market participants engaged in programmatic trading to enhance market stability and protect smaller investors.

On 15 August 2025, Hong Kong Exchanges and Clearing (HKEX) has released detailed technical specifications for the reporting of programme trading conducted through the northbound channel of the Stock Connect scheme. The document provides China Connect Exchange participants (CCEPs) and Trade-through Exchange Participants (TTEPs) with the operational framework for fulfilling new reporting obligations in line with SSE and SZSE requirements above.

Exemption Process Details

On 31 October 2025, HKEX issued a circular, introducing a new mandatory checklist for market participants seeking an exemption from additional HFT reporting obligations. The investor must satisfy two requirements:

• HFT activity must be limited to order-splitting solely for mitigating market impact or ensuring fair execution.

• The investor must be either a fund manager that exclusively issues public funds, or a participant of The Stock Exchange of Hong Kong Limited (SEHK) holding a Type 9 (asset management) licence for a continuous period of not less than five years.

The exemption is also available to qualified foreign investors (QFIs), who should fill in their QFI licence number in the main programme trading reporting form.

Investors seeking to rely on the exemption, other than QFIs, must now submit the completed HFT Exemption Checklist along with the relevant supporting documents through HKEX's Electronic Communication Platform (ECP).

HKEX said the submission of the checklist and documents does not in itself constitute the granting of an exemption, and the SSE or SZSE may still request the investor to furnish additional HFT-related information.

Coinciding with the announcement, HKEX released an updated version (v1.2) of the "Program Trading Reporting for Northbound Trading under Stock Connect – File Interface Specification". The technical document details the precise file naming conventions for submitting the HFT Exemption Checklist and its supporting documents.

These updates follow an earlier circular from 17 October 2025, which reminded CCEPs and TTEPs to ensure they have obtained valid client consent for the transfer of personal data to HKEX, mainland exchanges, and relevant regulatory authorities.

The circular also stressed that all file names uploaded to the ECP are case-sensitive and must strictly follow the prescribed naming convention.

Broader China Considerations

Securities companies are mandated to monitor clients' programmatic trading activities in real-time for abnormal transactions and must report these activities directly to the stock exchanges, with the potential for trading restrictions in response to significant market fluctuations.

The rules define high-frequency trading based on specific thresholds for order submissions and cancellations, introducing differentiated management requirements and fees for firms classified as high-frequency traders, including those participating via the Stock Connect program.”

Thanks for reading,