10 December 2016

44975

Retired Member

2,018Posts 6,641,104Views 2,336Comments

Smoke-free markets

12 December 2013  |  2098 views  |  0

In recent months regulators have increased their focus on detecting and reporting possible incidents of market abuse. In Europe trading firms are expected to check for potential offences and report their suspicions to the regulator. As part of the MAD Review, the current list of indicators for market abuse will be promoted from a Level 3 document to the newLevel 1 regulation text, cementing the shift in focus. Additionally, ESMA is consulting on a number of new indicators for the Level 2 text.

While some of the new signals come as no surprise – high order-to-trade ratios, for example – others, such as “smoking” appear to be rather awkward. According to ESMA, the trading practice of smoking describes the “posting of alluring limit order…to attract slow traders”. What this actually means in terms of day-to-day operation is unclear. The activities of oil market speculator Michael Coscia (found guilty of market abuse earlier this year) are unlikely to be considered smoking because the whole incident of abuse, including the response by the ‘lured victim’, took place within 609 milliseconds. Incredibly fast in human terms, but an eternity for some HFTs. Besides, is any order that decreases the spread ‘alluring’? If that was the case, there would be an awful lot of potential market abuse going on. Let’s hope that the on-going consultation process brings some clarity before the markets are designated smoke-free zones.

 

TagsTrade executionRisk & regulation

Comments: (0)

Comment on this story (membership required)

Latest posts from Retired

An industry matured: highlights from Mobey Day 2016

18 October 2016  |  958 views  |  0 comments | recomends Recommends 0 TagsRetail bankingInnovation

Reorganising for the Age of Collaboration

27 September 2016  |  2546 views  |  0 comments | recomends Recommends 0

Fintech innovation in the B2B space has only just begun

12 September 2016  |  13679 views  |  1 comments | recomends Recommends 0 TagsPaymentsInnovation

Protecting Data with DLP

23 August 2016  |  5360 views  |  0 comments | recomends Recommends 0 TagsSecurityBrexit

How to end what ails online commerce

22 August 2016  |  4791 views  |  1 comments | recomends Recommends 0 TagsPaymentsTransaction banking

Retired's profile

job title
location
member since 2014
Summary profile See full profile »

Retired's expertise

What Retired reads
Retired writes about

Who's commenting on Retired's posts

Alex Aleksandrovski
Ketharaman Swaminathan
João Bohner
Steven Hatton
Graham Seel
Nikhil Thadani
Gerard Hergenroeder
Konstantin Rabin
Dharmesh Mistry
Matt Schofield
Anna Robert
Ian Davis