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High Frequency Trading

High Frequency Trading

Hedge Fund Group Against High Frequency Trading Rules

One of the more important innovations in trading is high frequency trading. High frequency trading is a special rapid brand of algorithmic trading that some estimate makes up as much as 70% of trades. After the May 6th stock market flash crash, regulators have set their sights on such trading that many believe exacerbated that crash because high frequency traders pulled out of the market as stocks plummeted. The Managed Funds Association, a hedge fund lobbying group, issued a warning to regulators against cracking down on high frequency trading.
The U.S. hedge-fund industry’s biggest lobbying group urged regulators against cracking down on high-frequency trading, saying new rules would increase costs for all investors and make markets less liquid.

Requiring computerized traders to buy and sell shares during periods of market stress would reduce volume, Stuart Kaswell, general counsel of the Washington-based Managed Funds Association, wrote in a Sept. 12 letter to a panel advising the Securities and Exchange Commission and Commodity Futures Trading Commission. Investors would pay more for stock transactions as a result of the market maker requirement, Kaswell wrote.

“We respectfully urge that you proceed cautiously and introduce changes that are supported by empirical data,” Kaswell said in the letter, which was also sent to SEC Chairman Mary Schapiro and CFTC Chairman Gary Gensler. “Changes not supported by empirical data and directed at preventing rare market dislocations, could further harm investors.” Source


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http://richard-wilson.blogspot.com/2010/09/high-frequency-trading.html
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