Author Information

Zhong Wei, Researcher at the Research Center of Civil and Commercial Jurisprudence of Renmin University of China, and Associate Professor at the Renmin University of China Law School. Research focus: Commercial Law.

Qian Cheng, Ph.D. Candidate at the Law School of Renmin University of China. Research focus: Commercial Law.

Abstract

As an important tool for regulating program trading, China's reporting system for program trading should anchor its normative functions in preventing market risks and supporting ex-post accountability. Optimization should be carried out in three dimensions, including the specific content of reports, the administrative liability framework, and the articulation with private law rules. In terms of reporting content, the reporting system shall improve its information collection mechanism by adopting "counterfactual" as the criterion for determining the granularity of traders' reports and disclosing key factors influencing algorithmic decision-making to regulators. Meanwhile, regulators should be permitted to inspect source code when necessary for law enforcement and build an algorithmic labeling mechanism as an auxiliary tool. In terms of administrative liability, the liability framework should be constructed with incentive compatibility as the key logic. By refining responsibility allocation and strengthening traders' accountability, the system can encourage traders to properly fulfill their reporting obligations. In terms of private law effects, violations of the reporting system may result in restrictions on the trading qualifications of program traders but should prudentially extend to the validity of trading activities or the civil liabilities of securities and futures firms.

Keywords: program trading, quantitative trading, algorithmic trading, reporting system, financial regulation