Regulators approve crackdown on high-frequency trading

 
Tim Wallace
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HIGH frequency traders (HFT) will have to stop work when regulators deem markets too volatile, under rules voted through by the European Parliament yesterday.

Regulators argue the algorithmic traders promote instability in markets and damage other investors.

The sector maintains it is an important source of liquidity and that the traders help markets find prices.

HFTs will also have to store more data on trades and cancelled orders, and have their systems approved by regulators.

Lawyers expect the sector to be squeezed hard by the new rules.

“Financial institutions are already pulling out of high-frequency trading and commodities trading due to declining returns and a heavy compliance burden,” said Ash Saluja, from law firm CMS.

“[The directive] is likely to accelerate the flight, as the regulators will have additional powers and might get ideas from Michael Lewis’ new book ‘Flash Boys’ about what will grab the headlines.”