CHINA INVESTIGATING AUTOMATED HIGH FREQUENCY TRADING AS STOCKS SLUMP

August 13, 2015 By Joseph P. Farrell

stock photoIf you've been watching China's stock market, you'll be interested in this article shared by Mr. S.D.:

China cracks down on automated trading

While the article is suggestively short on words and information, I strongly suspect there's a lot lurking between, and behind, the lines. Consider these statements:

In its latest bid to restore calm to the domestic stock markets, Chinese authorities confirmed Friday that they'd started investigating automated trading practices and their role in the continued sliding of many shares.

China's two main stock markets have lost about 30 percent of their value since mid-June, with authorities bending over backwards to prevent a further sell-off.

The China Securities Regulatory Commission (CSRC) said it was looking into institutions and individuals and their role in program or automated trading, which it said had amplified big fluctuations on the stock market.

The practice of computerized automated trading typically involves transactions being carried out at high speed on a large number of stocks.

To my mind - and herewith today's high octane speculation - this is tantamount to saying that while China's markets were "correcting", that correction itself was being over-driven by computerized trading, and that additionally, the Chinese government may suspect that some, perhaps even a large, part of this activity may have been very deliberate. Clearly the Chinese suspect something, for as the article also states later, certain specific trading accounts have been suspended, and this can only mean that the Chinese government suspects that their markets have been subject to deliberate manipulation. The real question, should this prove to be the case, is: Deliberately manipulated by whom? and why? The obvious suspect would be "the USA," but I think this might be simplistic.

One may look at the Chinese market slump in two ways, first as a "correction" which has been amplified by the presence of high frequency computer trading...

...or, to use the expressive analytical term of former HUD Assistant Secretary Catherine Austin Fitts, one may view it as an example of "harvesting," along the classic lines of pump and dump, in this case, a pump and dump of China's equity markets, driven, aided, and abetted by certain HFT traders, who in all likelihood are simply acting as the agents or middlemen for hidden players.

Given the fact that the BRICSA nations are driving a parallel clearing and investment banking structure, and given that China has established its own Asia Infrastructure Development Bank, my speculation also includes the possibility that the Chinese know about this hidden financial system and harvesting mechanism, and hence, their current reticence to be more forthcoming about their investigations. This means, should my model be true, that we can predict that in the future, the BRICSA nations might start hinting openly about the existence of that hidden system.

See you on the flip side...