Abstract:
While algorithmic trading enhances the liquidity and efficiency of securities and futures markets, it may also trigger new market disorder risks through high-frequency order placement and cancellation, algorithmic inducement, and other means. The existing regulatory path centered on anti-manipulation provisions, with artificial prices and manipulative intent as core constitutive elements, faces evidentiary difficulties and application failures in the context of algorithmic high-frequency trading and automated decision-making, failing to effectively cover novel illegal behaviors such as spoofing and layering that significantly disrupt markets but do not necessarily constitute price manipulation. The essence of illegal algorithmic trading behaviors is not entirely manifested in price distortion, but also in the disruption of market signal authenticity, trading order stability, and trading system security. Accordingly, it is necessary to establish, based on Article 45 of the Securities Law and Article 21 of the Futures and Derivatives Law's anti-disruption provisions, a liability determination structure centered on market order damage consequences and intent to disrupt markets, constructing an independent regulatory path distinct from anti-manipulation provisions. Particularly regarding subjective elements, "recklessness" (indirect intent) should be introduced as the minimum standard for actors' subjective intent to reduce the difficulty of regulating market-disrupting behaviors. At the systemic level, anti-disruption provisions and anti-manipulation provisions constitute a dual-layer regulatory structure: on one hand, even when actors do not constitute market manipulation, as long as their algorithmic trading activities significantly impact trading order or system security, liability can be pursued under anti-disruption provisions; on the other hand, when algorithmic traders' behaviors satisfy the constitutive elements of market manipulation, they can be further regulated by anti-manipulation provisions.
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