(Yicai) March 5 -- The Shanghai and Shenzhen stock exchanges said they have jointly held a compliance training session for quantitative hedge fund firms to prevent risks to the securities market from quant trading.

The heads and other key managers of 28 quant funds took part, the bourses announced separately late yesterday. The training was also aimed at helping the funds understand the regulatory thinking and work requirements for quant trading and effectively improve compliance levels, they said.

One participant told Yicai that he was notified to attend the session at the Shenzhen Stock Exchange on Feb. 29. It was for senior compliance and trading managers and heads or backbone employees of business departments, he added.

In quantitive trading, decisions are made based on mathematical models and computer algorithms rather than human analysis and judgment. Because it generally features high-frequency trading and fixed trading strategies, it may intensify market volatility and increase market risks in the case of a sharp rise or fall.

China has toughened the regulation on quant trading since the stock market's rapid downturn in January. On Feb. 20, the Shanghai and Shenzhen bourses suspended Ningbo Lingjun Investment Management Partnership for three days over irregular quant trading.

Lingjun Investment's account was temporarily halted after the fund sold CNY2.6 billion (USD361.2 million) of Chinese mainland shares within the first minute of trading on Feb. 19, which resulted in a brief and sharp drop in the Shanghai Composite Index and Shenzhen Component Index, disrupting the normal trading order, the exchanges said.

China had 104 private fund firms managing over CNY10 billion (USD1.4 billion) each as of the end of last year, according to data from fund distributor Simuwang. Thirty-three were solely quant traders, 13 traded using quantitive and human-based decision-making, and 58 traded based only on human decisions.

Editors: Dou Shicong, Martin Kadiev