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22 October 2013

FT: Europe agrees on high-speed trading regulation


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European policy-makers have reached a tentative agreement over plans to regulate high-speed trading, as they strengthen the region's markets in the face of rapid technological change.


An agreement was struck between the European Commission, the council of states and the European parliament at a meeting in Brussels on Monday. A note circulated by Lithuania, the present holder of the EU presidency, said all parties had “broadly agreed” on a compromise package.

The deal forms part of an intense three-month period in which European policy-makers are attempting to agree to a review of the Markets in Financial Instruments Directive, or MiFID, a sweeping law that governs trading of all securities in Europe. Following the financial crisis, lawmakers have declared a desire for rules that toughen the trading of derivatives and cover the rise of high-frequency trading, a feature of markets for the past six years.

“On the basis of the preliminary agreement, the finalisation of the compromise package was delegated to the technical group. The package would also include the HFT-related definitions", the note by the Lithuania presidency said.

European lawmakers also allowed that market operators should be able to identify orders on their venues that had been generated using slower electronic trading methods. However, the package omitted a proposal by the European Parliament that all orders would have a minimum resting time of half a second. Critics had argued that the move would only serve to increase high-frequency trading by creating an order whose price was frozen in the market for 500 milliseconds.

The Parliament also climbed down on its proposal to ban so-called “sponsored naked access”, the practice of allowing customers to use someone else’s exchange membership to trade on a market directly.

Full article (FT subscription required)



© Financial Times


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