U.S. Securities and Exchange Commission Bans “Naked Access” to Traders

In an attempt to prevent an electronic trading error from happening in the future, the U.S. Securities and Exchange Commission finally voted in favor of banning “naked access” to traders. Why this is relevant to high-frequency traders will be explained at Golden Networking's High-Frequency Trading Experts Workshop 2010 (http://www.HFTExpertsWorkshop.com), "Practical Implementation of High-Frequency Trading Strategies", Hong Kong, November 22 & 23 and New York, December 9 & 10.”]High-Frequency Trading Experts Workshop 2010

As reported by Jessica Holzer from The Wall Street Journal, “Such trading arrangements have exploded with the growth of high-frequency trading firms, which often don’t want to be bogged down by a broker’s controls. In some cases, brokers rely on assurances from traders that they have their own controls in place. The SEC voted unanimously Wednesday to adopt a proposal it made in January requiring brokers to put in place risk controls and supervisory procedures relating to how they gain access to the market.”

“The requirements apply to all brokers, regardless of whether they sponsor customers seeking to access the market via the broker’s systems. The rules effectively ban naked access because they require traders to funnel their orders through the brokers risk controls.”

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