Brokers Unclear on True Impact of High-Frequency Trading

As reported by Michelle Price of marketwatch.com, banks and dealers have called for more research into high-frequency trading, warning in a letter to global watchdog the International Organization of Securities Commissions that the impact of the controversial trading practice remains unknown.

The Association for Financial Markets in Europe, the bank trade association, and the International Derivatives and Swaps Association, the global dealer group, said in a letter to The Association for Financial Markets in Europe, the bank trade association, and the International Derivatives and Swaps Association, the global dealer group, said in a letter to global regulatory body Iosco that efforts to clamp down on high-frequency trading must be guided by “valid and un-conflicted evidence.”

The letter, which was written in response to Iosco’s consultation on high-frequency trading strategies and other market structure issues, follows yesterday’s call by the European Principal Traders Association, the European proprietary traders lobbying group, for regulators to proceed with “caution.”

AFME and Isda, which together represent the world’s biggest and most powerful banks and brokers, acknowledge that HFT has brought some benefits to the market but stress that the true implications for the capital markets can only be discerned through more rigorous research.

They said: “Whilst it is the case that trading volumes have increased and spreads have declined, questions do remain as to a wider array of other impacts… We consider that further research is therefore required to examine the total impact of high frequency trading.”

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