The instructions were given verbally by the Shanghai and Shenzhen Stock Exchanges through so-called "window guidance", or unofficial policy directives with no written documents, one of the sources said.
"They asked (us) to avoid abnormal trading activities, including massive sell-offs and buy-ins. Basically it's a move to stabilise the market," the source said.
Another buy-side source said they also received the notice. "It's politically sensitive," the source said.
The sources asked not to be named due to the sensitivity of the issue.
China's ruling Communist Party opens its 20th congress on Oct. 16. It is likely to end with President Xi Jinping anointed for a third, five-year term as the supreme leader and a shuffle of personnel on the decision-making Politburo.
In late July, the Shanghai Stock Exchange (SSE) vowed to maintain market stability ahead of the Party Congress, saying it will "resolutely" prevent big and swift swings in capital markets.
A compliance officer at a Shanghai-based mutual fund house said he had not received window guidance, but that helping to ensure market stability ahead of the congress "is a natural responsibility" for fund managers.
China's main stock benchmark CSI 300 has lost roughly 6% so far this month, and more than 20% so far this year.
Risk appetite has been dampened by gloomy growth prospects as COVID-19 outbreaks, property market woes and heightened geopolitical tensions hurt economic growth.
China's Shanghai and Shenzhen stock exchanges and the China Securities Regulatory Commission (CSRC) did not immediately reply to Reuters' requests for comment.
(Reporting by Shanghai Newsroom; Editing by Kim Coghill and Ana Nicolaci da Costa)
