Germany moves to regulate high-frequency trading

(Reuters) – Germany’s ruling coalition has agreed key points for regulating ultra-fast trading on stock exchanges such as giving regulator Bafin the right to oversee so-called high-frequency traders, coalition sources told Reuters on Thursday.

The regulation will likely make it illegal to manipulate markets using strategies such as constantly requesting pricing information without intending to trade, the sources said.

“We are on the right path – the finance ministry has made convincing suggestions,” Klaus-Peter Flosbach, a finance expert for Chancellor Angela Merkel’s conservatives, told Reuters.

CLAMPDOWN

Under German law, algo traders do not need separate authorization to conduct HFT and there are no rules governing system breakdowns but the government now wants to close this gap in the regulatory framework.

The finance ministry draft paper said algo traders would need separate authorization to engage in HFT and added that they would also have to keep comprehensive documents for Bafin.

High-frequency trading has increased the speed and complexity of trade and it conceals a multitude of risks,” the finance ministry said.

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