Chinese regulators are investigating the participation of Jane Street Group and other foreign firms in China’s $US859 billion exchange-traded fund (ETF) market. The inquiry seeks detailed information on activities conducted by brokers within this rapidly expanding sector. This scrutiny follows action against Jane Street in India, where the firm was accused of misleading retail investors through alleged index manipulation, claims the New York-based firm denies.
Jane Street, a global quantitative trading firm, was identified as the largest foreign ETF market maker in China through the qualified foreign investor (QFI) program as of June 30. Optiver, Susquehanna International Group, and Hudson River Trading followed. Despite its position, Jane Street accounts for less than 2 per cent of mainland China’s overall ETF trading. UBS Group AG temporarily suspended some trades from Jane Street via the QFI program late last year due to China’s queries. According to one source, UBS accounted for a relatively small portion of Jane Street’s China ETF transactions before the pause.
Jane Street has stated that it is conducting business as usual with counterparties globally, including UBS, across asset classes. Representatives from Susquehanna, Hudson River, and UBS declined to comment, while the China Securities Regulatory Commission and Optiver did not respond to requests. UBS’s action was described as precautionary and did not affect Jane Street’s other strategies for China. No firm is accused of any wrongdoing, and there is no indication that trading relationships among Jane Street’s peers have been affected.
The increased oversight of foreign market makers highlights China’s concern about its stock market’s performance. The market, dominated by retail investors, is susceptible to volatility. Beijing employs various measures to manage volatility, including regulations, private pressure, and occasional interventions by state-owned investment funds.
