Oslo Bourse Penalizes Unexecuted Orders From Automated Trading

By Peter Levring from Bloomberg News – May 24, 2012

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Oslo’s stock exchange will introduce a fee designed to limit computer-generated orders after equity strategies based on mathematical models boosted the number of withdrawn trades and clouded market transparency.

The fee, which will be enforced from Sept. 1, will apply to any order exceeding 70 for each executed trade and will mainly target “orders which are canceled or changed within a second, without contributing to improving pricing or volumes,” Oslo Boers ASA said in a statement today. The exchange will charge 0.05 krone ($0.01) for every unexecuted order exceeding the 1:70 ratio.

Trading based on mathematical models, known as algorithmic and high-frequency trading, has come under scrutiny after a May 2010 crash that briefly erased $862 billion from the value of U.S. shares. Traders and other professional investors withdrew bids as the selloff worsened, according to a September 2010 report from the Securities and Exchange Commission and the Commodity Futures Trading Commission.

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