A lengthy defense of quantitative trading published by the Asset Management Association of China (AMAC) over the weekend has drawn sharp criticism, with even the advanced Kimi AI model pointing out numerous factual inaccuracies and logical flaws.
The AMAC's Private Securities Investment Fund Professional Committee released a detailed interview on July 25th, aiming to clarify the role of quant strategies. When analyzed by Kimi, the text revealed several instances where statements contradicted common knowledge, public facts, or involved conceptual confusion. Below is a breakdown of the key issues identified.
Issue 1: The Claim that "All Investors are Limited to T+1 Trading" is Incorrect
The AMAC stated: "Regardless of the type of investor, all are restricted to T+1 trading in the stock market and cannot engage in T+0 trading, including quantitative investors."
This is factually wrong. The A-share market has several instruments that naturally support T+0 trading, and quantitative institutions actively participate in them. These include:
ETFs: Cross-border ETFs (like the Nasdaq ETF and Hang Seng Tech ETF), bond ETFs, gold ETFs, and money market ETFs all permit T+0 trading.
Convertible bonds: These operate under a T+0 trading system.
Underlying Position T+0: Quantitative institutions can hold a base position and effectively execute a "sell first, buy later" or "buy first, sell later" strategy on the same day to achieve a de facto T+0 reversal.
Furthermore, while the use of securities lending for T+0 reversals was restricted in 2024, it was not completely eliminated. Quantitative institutions can still achieve intraday reversals through methods like ETF primary and secondary market subscription and redemption arbitrage.
Issue 2: Misleading and Incomplete Description of US Market Regulation
The AMAC stated: "The US market also does not require quantitative institutions to disclose their order books or specific trading details in real-time... Large trading firms, including major quantitative institutions, are not required to submit their core strategy logic or risk control details to regulators."
This is a severe misrepresentation of the US regulatory framework. The US Securities and Exchange Commission (SEC) operates a Consolidated Audit Trail (CAT) that tracks the complete lifecycle of every trade, order, and quote in the US equity market, including all order placement, cancellation, modification, and execution details. Additional regulations include:
Large Trader Reporting: Since 2011, the SEC has required traders exceeding a certain volume to register and report detailed trade data, including order placement, cancellation, and modification information, which must be submitted by the next trading day.
Form PF: Large private funds are required to report strategy types, risk exposures, and other information to the SEC.
Regulation SCI: This requires key participants in the trading system to establish operational standards and submit to regulatory oversight.
Prohibition on Naked Access: In 2010, the SEC explicitly banned brokers from allowing clients to bypass risk controls and directly access exchanges.
The AMAC’s claim that the US "does not require the submission of core strategy logic and risk control details" directly contradicts these established regulations. While US regulators do not require public, real-time strategy disclosure, their reporting and tracking requirements for firms are actually very strict.
Issue 3: Data Error – Confusing "Order Volume Share" with "Order Cancellation Rate"
The AMAC stated: "Compared to the US market's average order cancellation rate of over 90% and the Japanese market's rate of around 70%..."
The "70%" figure for the Japanese market is based on a conceptual confusion. According to a Caixin Weekly investigation of the Tokyo Stock Exchange, the actual data shows that high-frequency traders' order volume accounts for 70% of the total order volume on the exchange (as of end of 2023). This is a "share of order volume," not an "order cancellation rate." The AMAC has incorrectly equated the two. As for the "US market's average cancellation rate of over 90%," no authoritative source could be found, and it likely represents a generalization based on the characteristics of a few high-frequency trading strategies.
Issue 4: The Claim That Quant Private Funds "Maintain Over 90% Positions in Both Bull and Bear Markets" Defies Logic
The AMAC stated: "As for quantitative private funds, they maintain high positions of over 90% regardless of whether it's a bull or bear market."
This is inconsistent with the basic strategic reality of the quantitative industry. Quantitative private funds use a variety of strategies, not all of which maintain high positions:
Market Neutral Strategy: This strategy holds both long and short positions (using stock index futures or securities lending for hedging), resulting in a net market exposure close to zero, not "over 90% long positions."
CTA Strategy: This involves long and short futures positions and can be net short or even have zero exposure.
Equity Long/Short Strategy: This strategy explicitly holds short positions.
Arbitrage Strategy: The position characteristics vary by strategy.
In fact, in October 2024, top quantitative firm High-Flyer announced that it would reduce its "hedged product investment positions to 0" due to a change in market conditions. This directly proves that quantitative private funds do not "maintain over 90% positions in both bull and bear markets."
Issue 5: Claim that Quant Funds "Do Not Use Securities Lending or Stock Index Futures" Contradicts Facts
The AMAC stated: "Take quantitative private funds as an example; they do not use tools like securities lending or stock index futures to suppress the market."
This is paradoxical because the market-neutral strategy fundamentally relies on these tools. The core logic of a market-neutral strategy is to build a long portfolio of stocks while simultaneously establishing a short position using stock index futures or securities lending to hedge. Saying quant funds do not "use" these tools negates the very basis of the market-neutral strategy. Furthermore, the sharp rally in A-shares in September 2024 caused significant losses and even forced liquidations for many market-neutral products due to losses on their short stock index futures positions. This is direct evidence that quantitative funds use hedging tools like stock index futures heavily and on a daily basis.
Issue 6: Flawed Logic in Dismissing "Concentrated Selling"
The AMAC stated: "After consulting with leading brokerages and quantitative private funds, on days when the market fell sharply last week, many quantitative institutions were net buyers, not net sellers..."
This argument suffers from two key flaws:
Sample Bias: Consulting only "leading institutions" does not represent the entire quantitative industry.
Conceptual Confusion: The fact that an institution is a "net buyer" overall does not preclude it from selling large amounts of a specific stock. A core feature of quantitative strategies is frequent portfolio rebalancing across many stocks. It is entirely possible for an institution to be a net buyer while simultaneously creating concentrated selling pressure on individual stocks. Additionally, the self-reporting of the subjects under investigation (quantitative institutions) lacks independent third-party verification.
Issue 7: Acknowledging a Technical Advantage While Claiming "Rule Fairness" is a Sleight of Hand
The AMAC stated: "The current trading rules of the exchange are fair to all types of investors."
"This is mainly due to quantitative trading's information and technical advantages, not a difference in trading rules or regulatory systems."
This is a form of concept substitution. The "unfairness" that investors complain about has never been about the "text of the trading rules" being unequal. It is about the asymmetry of information and speed in actual trading. The AMAC, on one hand, admits that quantitative trading has "information and technical advantages," and on the other, claims the "rules are fair." This misses the core point: formal equality of rules does not equate to substantive fairness in practice.
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