EU near to ban on high tech trading

City A.M. Reporter
COMMODITIES traders could face limits on the positions they can take, aimed at cutting down on speculation if regulators get their way in negotiations this week.

EU policymakers also want to ban banks from giving outside brokers direct access to markets as part of a sweeping crackdown on computerised high-frequency trading (HFT), a European Parliament report said yesterday.

The report was the assembly’s initial response to a draft law aimed at reining in computerised or algorithmic trading and other advances in technology which have made it harder for supervisors to see the full picture and control markets.

The EC proposed the draft law, known as MiFID II, last year and it is now before parliament and EU states for approval, with changes expected.

Markus Ferber, the German lawmaker who is steering the measure through parliament, said in his report that a tougher crackdown on HFT was needed than outlined in the draft law.

HFT has increased volume on many exchanges and the Federation of European Securities Exchanges urged caution on Monday about taking such radical measures.

“We need to do some homework first. I don’t think Ferber wants to kill the market but wants to be on the safe side,” said Judith Hardt from the Federation of European Securities Exchanges.

Other exchange officials said a ban on direct market access and requiring minimum periods for orders would damage liquidity and force people to risk their capital when they don't want to.

They were also dismayed that Ferber wants to harden controls on the size of positions commodity traders can hold.