NYSE to Cancel Trades in 6 Stocks Affected by Glitch
'Observers said the problem highlighted the weaknesses in the market that remain two years after the Flash Crash.
"The structure that we have in place is so complicated and intertwined, that all of these entanglements have created real issues in the marketplace," said Christopher Nagy, a consultant to exchanges and brokerages.
"Today it's Knight. Tomorrow, who's it going to be? And the day after that, who's it going to be? The fixes that we're putting in the marketplace are just not fixing things." '
cnbc.com
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High Frequency Trading Regulation
HFT participants, including the FIA Principal Traders Group generally supported the study's findings and recommendations. According to the group's press release, the PTG "agrees with the committee’s conclusion that market-based incentives are more effective than mandatory obligations in promoting well-functioning markets", and "looks forward to working with the regulators and the exchanges on developing safeguards that will prevent clearly erroneous trades and other market malfunctions."[3]
Some regulators, however, voiced concerns that HFT still poses systemic risk. One staunch critic of HFT is CFTC Commissioner Bart Chilton, who in June 2011 said that "regulators have largely failed to police high-frequency trading, which accounts for roughly 50 percent of European trading and about a third of activity in the United States markets."[4]
Proponents of high frequency algorithmic trading, however, point to several studies and white papers that highlight HFT's contribution to enhanced market liquidity, greater price efficiency, and reduction in volatility.[5]
At a meeting of the CFTC Technology Advisory Committee meeting on June 20, 2012, a subcommittee working group submitted its draft definition of HFT. According to the subcommittee, high frequency trading is a form of automated trading that employs:
- algorithms for decision making, order initiation, generation, routing, or execution, for each individual transaction without human direction;
- low-latency technology that is designed to minimize response times, including proximity and co-location services;
- high speed connections to markets for order entry; and
- high message rates (orders, quotes or cancellations).
marketsreformwiki.com
Jim |
