Proposing reforms on High Frequency Trading

Regulatory reform is seeing some fresh new turns. On Friday 14^th October regulators from around the world including from the US and Singapore congregated in London to discuss supervision of ultra fast computerized trading such as high frequency trading (HFT). Some regulators have viewed HFT as a potential tool for speculators which can increase risk in the financial markets. The matter of HFT comes into spotlight following the events of May 6 this year, when the Dow Jones blue chip index plunged some 700 points.

Gary Gensler from CFTC observed that some 80 or 85 %of the transactions are either day trading or spread trading – both trades occurring within one day. Gensler’s agency proposes curbing risks by supervising algorithms used in trading. Global regulators seem to welcome the idea of tightening regulations on HFT. The European Union’s executive European Commission in particular plans to publish a draft law by the end of October this year.

Details of the update can be found here in the Reuters update