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Against the backdrop of difficult market conditions and growing investor…
12/10/2011
If it moves, said Ronald Regan, tax it. If it moves quickly? Politicians in today’s world of high-frequency trading (HFT) seem to have an answer to that too: tax it, regulate it, and throw the kitchen sink at it. All at the same time. Just to make sure.
Last month, the Financial Industry Regulatory Authority (Finra), a US watchdog that reports to the SEC, took the unprecedented step of asking HFT firms to hand over some of the ingredients to their secret sauce. “There’s something that’s troubling us in the marketplace,” said Finra’s Tom Gira in an interview with Reuters.
Across the pond, the attitude is similar. In August, UK politician Lord Myners called for such strategies to be investigated. Esma is similarly enthused – the EU super regulator is currently preparing a consultation with the aim of bringing all HFT entities under MiFID. An EU-wide financial transaction tax, proposals on which were released just this week, won’t help matters either.
Among the industry’s recent best performers (Man Group’s AHL was one of the firm’s few bright spots in terms of both performance and inflows during last week’s disastrous H1 trading results) and most active recruiters, HFT funds have offered the industry some respite.
In fact, a recent working paper from the UK’s Department of Business, Innovation and Skills, found that, while future risks were apparent, the markets had not been harmed by HFT during regular market conditions.
High-frequency traders have more reasons than most to feel aggrieved. During a period of widespread regulatory scrutiny, that’s saying a lot.
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