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UK Treasury examines high-frequency trading threat to economy

30 September 2010  |  6677 views  |  0 biometric  eye

The UK Treasury is sponsoring a probe into high-frequency trading amid fears that computer-generated problems could hit financial stability, affecting the whole economy, according to the Financial Times.

Citing an e-mail from within the Treasury, the FT says Lucas Pedace, in the government Office for Science, part of the Department for Business, Innovation and Skills, will lead a group studying the issue.

The e-mail says that the 6 May US "flash crash" - when the Dow Jones industrial average plummeted in minutes - shows the "vulnerability" of high-frequency trading, claiming the tactic was a contributory factor to a decline in confidence.

"The possibility remains of a computer-generated trading failure occurring in the UK and having a significant economic impact," says the e-mail.

In the US, the Securities and Exchange Commission is expected to publish its report into the flash crash soon, with high-frequency trading and technology expected to bear some of the blame. In Europe, the phenomenon is also being investigated as part of an overhaul of the Markets in Financial Instruments Directive (MiFID).

Treasury to probe high-frequency trading - FT (subscription)

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