28 April 2017
visit http://events.sap.com/gb/fsi-forum-2017/en/home

ECB calls for gradual approach to HFT regulation

25 October 2016  |  4973 views  |  0 European Central Bank

The European Central Bank (ECB) is calling for a restrained approach to high-frequency trading regulation, arguing that more emphasis should be placed on high-frequency quoting.

HFT has long caused consternation among lawmakers thanks to several high-profile incidents, most infamously the May 2010 flash crash which saw the Dow Jones Industrial Average plummet.

But the ECB says that its research suggests that the practice actually dampens volatility on the market during normal times, although it can cause major problems during times of crisis.

The central bank is in no rush to pursue tough new rules, saying that more in-depth analysis is needed to mitigate risks while "preserving the benefits associated with technological progress".

Regulations should be rolled out gradually and there should be "more emphasis on high-frequency quoting relative to high-frequency trading".

This means a focus on kill switches that can be used when there are things such as erroneous trades or excessive volumes. Meanwhile, message throttling, limiting the number of quotes that can be processed, should also be on the agenda.

However, tougher measures such as minimum exposure times or order-to-trade ratios "seem, in light of our study, not yet necessary and should be used with care" because they could hit market liquidity, efficiency and resilience.

Yesterday Germany's Bundesbank took a less favourable view of HFT, issuing its own report on the practice which emphasised the risk of more flash crashes and backing the introduction of minimum resting times.

Comments: (0)

Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related company news

 

Related blogs

Create a blog about this story (membership required)
visit dh.comFind out morevisit vasco.com/news/PSD2-compliant-solutions

Top topics

Most viewed Most shared
hands typing furiouslyBitcoin ETF Bites the Dust, Needs More Sec...
17087 views 0 | 7 tweets | 7 linkedin
BBVA runs live funds transfers over RippleBBVA runs live funds transfers over Ripple
12221 views comments | 32 tweets | 20 linkedin
EC plans blockchain 'observatory'EC plans blockchain 'observatory'
8726 views comments | 9 tweets | 16 linkedin
Plastc goes into meltdownPlastc goes into meltdown
7344 views comments | 12 tweets | 7 linkedin
Six global banks join Swift DLT trialsSix global banks join Swift DLT trials
7113 views comments | 15 tweets | 36 linkedin

Featured job

to 120K base, £300K ote, stock options
London, UK

Find your next job