High frequency trading firms have been bought to regulators attention as the European Commission is pressing on stricter regulation to avoid market manipulation.
This could be the second blow European trading firms will face after France’s Sarkozy is planning a ‘special’ tax on financial transactions. These moves could put continued pressure on the Euro zone being a un-favoured location by financial markets professionals.
High frequency trading has been blossoming as more and more markets ar traded online. HFT has its advantages as the system can act as a price maker and taker however certain strategies firms deploy have been the cause of sever problems in the markets. he flash crash was the doings of the HFT trader and now regulators are keen to get some legislation in place. Sentiment is weak and there are indications of a double dip, regulators and central bankers are collectively working to revamp the markets and any new Lehman or Flash Crash will put a huge dent.
The commission report states that certain trading strategies used by HFT can cause market manipulation and these will be publicised and regulators will be able to catch on.
The UK has seen an influx of financial brokerages setting up their operations in London and it would be a huge hindrance to the local economies if firms look for new destinations to carry out their business.
Our next quarterly report will have an in-depth analysis of the High Frequency Trading environment Q$ will be available in mid January 2012.