ESMA has just published a report on high-frequency trading (HFT) activity in EU equity markets. It’s good to see the regulator producing an empirical study on such a hotly-debated and emotive topic.

Taking a sample of European stocks, and applying two possible definitions of HFT, ESMA estimates that between 24% and 43% of value traded is done by HFT. This sounds like a nice catchy headline, but it’s a little more complicated than that. Under its requirement to provide technical advice to the European Commission to specify the definition of HFT, ESMA proposed two different options in the MiFID II consultation paper; neither of those is applied in this particular study. With so many possible definitions, can ESMA’s most recent findings on the prevalence or otherwise of HFT have any practical meaning? Is it more a case of the results being driven by the underlying assumptions?

This latest study simply reinforces my view that attempting to define HFT is not a fruitful endeavour and we shouldn’t get hung up on labels.