Chinese Authorities Probe Tower Research for Alleged High-Tech Hardware Smuggling
Chinese authorities are investigating New York-based high-frequency trading firm, Tower Research Capital, for allegedly smuggling high-tech hardware into the country. The investigation involves hardware potentially subject to recent U.S. export controls, such as high-end GPUs, FPGAs, ASICs, HBM, and high-end Intel and AMD processors. If proven true, Tower could face significant fines and criminal charges.
The probe centres around allegations that Tower installed illicit 'customized processors and networking hardware' at the Shanghai Futures Exchange (SHFE) without declaring them to customs. The hardware, worth approximately $17 million, is suspected to have been smuggled into the country. High-frequency trading, which relies on specialized hardware for millisecond-quick trades, has been under scrutiny following a big market sell-off in 2024. Chinese authorities have instructed Tower not to remove the hardware from the SHFE server room until the investigation is concluded.
The Shanghai Futures Exchange only allows certified brokers to connect directly to its servers, aiming to minimize network latency and ensure an even playing field among traders. However, firms have been exploiting a legal loophole by installing custom servers under the name of approved Chinese brokers. Despite recent announcements of advanced AI clusters with domestically produced processors by Huawei, there are no confirmed reports that Tower smuggled specialized hardware into the SHFE.
The investigation into Tower Research Capital is ongoing. If the allegations are proven true, the firm could face substantial penalties and legal consequences. This case highlights the ongoing efforts by Chinese authorities to regulate and monitor high-frequency trading activities within the country.
