Bloomberg News

High-Frequency Trades Said to Be Topic at Regulator Meeting

October 10, 2011

(Updates with analyst comment in third paragraph)

Oct. 10 (Bloomberg) -- Mary Schapiro, the chairwoman of the U.S. Securities and Exchange Commission, and regulators from the U.S., Europe and Asia will meet in London to discuss high- frequency trading, said two people with knowledge of the discussions.

The summit at the U.K. Financial Services Authority on Oct. 14 will also include Gary Gensler, chairman of the Commodities and Futures Trading Commission, and Steven Maijoor, chairman of the European Securities and Markets Authority, according to the people, who declined to comment because the meetings are private. Officials from Japan, Brazil, Italy, Spain and Canada will also attend the meetings, which will look at regulatory issues other than high-frequency trading.

“High-frequency trading lends itself to potential abuse,” Sony Kapoor, managing director of policy advisory firm Re- Define, said in an interview. The practice could “cajole investors into a false sense of security by providing the illusion of liquidity which disappears exactly when it’s needed.”

High-frequency traders came under increased regulatory scrutiny following the so-called flash crash in May of last year, during which the Dow Jones Industrial Average briefly lost almost 1,000 points.

EU Regulation

The European Union is planning to impose limits on high- frequency trading firms to prevent a glut of trades from “overloading the systems of trading venues,” generating “erroneous orders” or “otherwise malfunctioning” in a way that may create a disorderly market, according to draft version of the measures scheduled to be formally proposed later this month.

SEC spokesman John Nestor didn’t immediately respond to a request for comment.

Steven Adamske, a spokesman for Gensler, didn’t return a message seeking comment. The CFTC said in a separate statement that Gensler would attend meetings at the FSA on Oct. 14.

High-frequency traders also face a proposed tax on financial transactions that could cut the trading practice by as much as 90 percent “in some market segments,” Manfred Bergmann, a European Commission official, said in a speech in Oxford, England, last week.

--Editors: Anthony Aarons, Peter Chapman

To contact the reporters on this story: Ben Moshinsky in London at bmoshinsky@bloomberg.net.

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net


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