HK regulator bears down on ‘algo’ traders

Jeremy Grant reported the following in FT:

Hong Kong’s market watchdog has proposed tackling the rapid growth of automated trading by requiring that algorithms are tested at least annually and that brokers have systems to prevent erroneous trades being spewed into the market.

The proposals, part of a consultation released this week, are a sign that Asian regulators are starting to bear down on automated trading in the wake of similar moves by their counterparts in Europe and the US.

Several cases of algorithms going wild and excessive amounts of computer-generated orders clogging up exchanges’ systems have added to concerns that rapid electronic trading poses risks if not more tightly controlled.

Automated trading has grown rapidly as equity markets have fragmented across multiple venues, requiring sophisticated technology that allows traders to use computer algorithms to hunt for the best prices.

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