The move is a sign that European regulators believe “high-frequency trading”, where dealers use computer programmes to trade at lightning fast speeds, could pose a threat to market stability.
The proposals are likely to provoke an outcry from some traders. They make no distinction between marketmakers, such as Getco, which routinely use algorithms to post prices continuously, and certain firms that use algorithms to carry out sophisticated trading strategies, or even asset managers that use algorithms to carry out trades over specific periods.
Any move to force traders to commit to being in the markets would put Europe ahead of the US in regulating automated trading. The proposals come as efforts to regulate HFTs are moving up a gear amid concern that ultra-fast trading and the use of computer algorithms to generate massive amounts of trades could destabilise markets, especially with the use of “directional” algorithms that critics say can exaggerate price movements.
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