Copper Falls to $5.90 per Pound as China Tightens HFT Regulations and US Delays Tariffs

Beijing | EcoPulse24

Copper futures declined for a second straight session on Friday, falling to around $5.90 per pound after China announced tougher restrictions on high-frequency trading (HFT) as part of broader efforts to reduce risks in capital markets. Chinese regulators instructed local exchanges to remove HFT firms’ servers from their data centers, aiming to curb the speed advantage these firms gain by co-locating their servers near trading systems. This move immediately impacted metal prices in Shanghai, London, and New York, sparking a wave of simultaneous selling.

Copper also faced additional pressure this week as the US postponed the imposition of tariffs on critical metal imports. Copper was added to the US critical minerals list last year due to its significance for national security, defense technologies, and grid electrification.

Analysis:
Beijing's clampdown on HFT reduces fast liquidity and increases price sensitivity to regulatory news, leading to higher short-term volatility. In the absence of strong demand drivers, copper is likely to remain under pressure, especially as the risk premium related to US tariffs diminishes. Medium-term trends will depend on signals from industrial demand and further regulatory policies in China.

FAQs

HFT (High-Frequency Trading):
HFT is a trading strategy using ultra-fast computer algorithms to execute thousands or millions of orders in fractions of a second, profiting from tiny price differences that repeat frequently.

How does it work?
- Automated programs make trading decisions without direct human input
- Orders are executed within microseconds
- Servers are placed close to exchange systems (co-location) for speed advantage
- Trades focus on small price gaps but in large volumes

Why is it controversial?
- Provides an unfair advantage to the technologically fastest firms
- Can increase volatility during market stress
- May rapidly withdraw liquidity during shocks (e.g., “flash crashes”)

Why is China tightening HFT?
- HFT increases short-term speculation risk
- May distort fair price discovery mechanisms
- Heightens market fragility during stress periods

As a result, regulators like those in China are moving to limit HFT’s influence to protect market stability.