High-Frequency Trading No Threat to Stability, Sweden’s FSA Says

As reported by bloomberg, high-frequency trading, under scrutiny from securities regulators globally, has had a minimal negative impact on the Swedish market and poses little threat to stability, the nation’s financial services watchdog said.

“The investigation shows that the negative effects related to high frequency and algorithmic trading are limited,” the Swedish Financial Supervisory Authority said today. “It is apparent that trading has undergone a transformation, and to some extent a deterioration, but most parties believe that this is due to multiple factors and not just faster, more computerized trading techniques.”

The role of high-frequency firms in periods of market swings has come under scrutiny since the May 6, 2010, crash that briefly erased $862 billion from the value of U.S. shares. Traders and other professional investors were said to have withdrawn bids as the selloff worsened, according to a September 2010 report from the Securities and Exchange Commission and the Commodity Futures Trading Commission. Regulators and exchanges later installed curbs to limit the disruption to markets.

In Europe, Financial Services Commissioner Michel Barnier last year proposed rules covering high-frequency trading as part of a wider overhaul of European Union market regulations, known as Mifid.

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