Industry Panel Addresses High-Frequency Trading

 

If high-frequency trading is not one of the top issues of discussion at this year’s Global Financial Leadership Conference, then properly addressing it in the future most likely is. The lead-off panel at the conference in Naples, Florida discussed the perceptions, realities and possible regulatory outcomes for high-speed electronic trading, often referred to as “algorithmic” or “high-frequency” trading.

Jeff Jennings, global head of listed derivatives at Credit Suisse, suggested that before finding the proper way to address HFT, which the CFTC is currently looking into, the industry should first define what it is:

“We have to agree on a definition. The first step is to define it, then determine where the risks lie.”

Edgar Perez, author of The Speed Traders, listed four key elements to defining HFT:

1. Talking about it in microseconds

2. Co-location, or the close proximity of matching engines between a trading firm and an exchange.

3. The use of highly liquid instruments

4. The lack of a need to hold investments, or an environment that allows rapid buying and selling.

Regardless of the definition, Richie Prager, head of trading and capital markets at BlackRock, says part of the solution is industry leadership proactively working to address the situation and propose solutions where they might be necessary:

“I’m of the school of thought that actually thinks there should be more industry leadership. So I do think there is a void. We should step up, because if we’re waiting for the regulators to tell us, we might not be happy with that answer “

Daniel Coleman of GETCO addressed the idea of uncertainty around high-speed trading, and shared his view that the industry is better off when compared to past eras:

“Large technological changes always lead to these kinds of uncertainties cause they’re really hard to get your arms around. And it happens a lot in different industries over history, and it’s happening now in ours. But I was also in this business before we had these changes, and as crazy as it is now, it’s better. It’s better from an execution point of view, it’s better from a competitive point of view with trading venues, in my view, and it’s better for the end client.”

 

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