AIMA

High Frequency Trading

The issue of high frequency trading (HFT) has recently been the subject of increased global regulatory attention. Legislators and regulators are also examining the larger issue of computer or algorithmic trading as part of their ongoing work to strengthen market structures and the manner in which trading is conducted. In October 2012, the UK Foresight comittee released a comprehensive report 'Foresight:The Future of Computer Trading in Financial Markets' which provides valuable insight for policymakers, legislators and regulators undertaking their work.

In the USA, the CFTC has recently been considering a possible definition of HFT while, in the EU, the European Commission proposals in respect of the MiFID review contain a number of provisions which would put restrictions on algorithmic trading as a whole, of which HFT is generally seen as a subset. Further, in the context of MAD II, the European Commission’s proposals would label a number of practices said to be linked to HFT as being specifically abusive.

Both ESMA and IOSCO have consulted on guidelines around the issue of HFT. In addition, the German Bundestag and Bundesrat, in a pre-emption of rules under MiFID II, have approved an Act (the Hochfrequenzhandelsgesetz) which imposes authorisation obligations, as well as organisational requirements (such as systems and risk monitoring and transparency to the regulator of details concerning algorithmic trading and/or changes to the computer algorithm) on high frequency traders, as defined.

 

• ESMA Guidelines
• MiFID / MiFIR
• MAD / MAR
• Flash Crash
• IOSCO
• Germany