High-frequency trading – a discussion of relevant issues - Xetra

High-frequency trading – a discussion of relevant issues May 2013SummaryHFT is a natural evolution resulting from technological developments and competition• HFT is a natural reflection of competition between market participants using the advances in computertechnology.• HFT is a technology that enables for the implementation of a wide range of trading strategies.• All actors in financial markets need to address this natural development– Proprietary traders/Market Makers: Implementation of speed-sensitive strategies requires constant and significanttechnology investment.– Brokers: Address customer needs for faster and more advanced execution of customer orders in a growing numberof electronic markets.– Exchanges: Invest in faster systems with larger capacity and a variety of safety mechanisms.– Regulators: Provide a framework for fair and transparent markets. Receive more information than ever to monitorthe markets. Challenge is the efficient use of the large amount of data.• A “deceleration of the markets” by regulatory intervention is not a solution.– Either the markets go somewhere else or the actors find ways of bypassing.• As a result of public pressure the risk of over-regulation for HFT is high, as exemplified by the multitudeof regulatory initiatives (MiFID, ESMA Systems & Control, national rules, e.g. German HFT Bill).40