Unregulated HFT trading a serious threat to market stability
HFT trading continues to ignite regulatory concerns, fuelled by a spate of technological glitches in trading exchanges. August 28, 2012 | Levina LimThe month of August, 2012, recorded a string of technological trading glitches in the area of securities and exchanges, resulting in a spate of out-of-control price fluctuations and trading suspensions. Knight Capital’s technological glitch earlier this month resulted in an unexpected mini flash crash in the market, where dozens of stocks on the New York Stock Exchange experienced volatile price swings – exacerbated yet again, by high-frequency trading (HFT) activity. Less than a week later, Spanish trading bourse Bolsas y Mercados Espanoles suffered a technical glitch that suspended trading for more than four hours. The Tokyo Stock Exchange also recently experienced a system failure resulting in the halt of derivatives trading for over 90 minutes, affecting 241 stocks. This outage represented the second technical glitch at the Japanese bourse in six months. These incidences inevitably caused concern for regulators worldwide, who are stepping in with recent announcements of regulatory proposals. Abnormal shocks to the system are an increasing concern to regulators, due to the potential systemic risks involved as a result of high speed trading, with as much as 50%-70% of trading volumes on exchanges in the US and Europe generated by HFT traders alone. The Australian Securities and Investments Commission (ASIC) has proposed regulatory additions and amendments through the recently released Consultation Paper 184, Australian market structure: Draft market integrity rules and guidance on automated trading. Market participants will be required to have direct control over pre-trade filters, and to suspend, limit or prohibit an order or series of orders from automated order processing that would interfere with the efficiency and integrity of the market. These mandatory controls ar... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Exchanges, Markets & Exchanges, Operational Risk, Risk and RegulationExchanges,Markets Exchanges,Oprisk,Risk and Regulation, Exchanges,Markets & Exchanges,Operational Risk,Risk and Regulation, Keywords:Knight Capital, ASIC, SEC, FSA, HFT, NYSE, TSE, BME, Systemic Risk, Sam Tyfield, Automat, Sal Arnuk, Themis Trading Knight Capital, ASIC, SEC, FSA, HFT, NYSE, TSE, BME, Systemic Risk, Sam Tyfield, Automat, Sal Arnuk, Themis Trading
|