Hand over your strategies and secret computer code.

Discussion in 'Automated Trading' started by PocketChange, Sep 1, 2011.

  1. WASHINGTON/NEW YORK (Reuters) - U.S. securities regulators have taken the unprecedented step of asking high-frequency trading firms to hand over the details of their trading strategies, and in some cases, their secret computer codes.

    The requests for proprietary code and algorithm parameters by the Financial Industry Regulatory Authority (FINRA), a Wall Street brokerage regulator, are part of investigations into suspicious market activity, said Tom Gira, executive vice president of FINRA's market regulation unit.

    ``It's not a fishing expedition or educational exercise. It's because there's something that's troubling us in the marketplace,'' he said in an interview.

    The Securities and Exchange Commission, meanwhile, has also begun making requests for proprietary algorithmic trading data as part of its authority to examine financial firms for compliance with U.S. regulations, according to agency officials and outside lawyers.

    The requests by SEC examiners are not necessarily related to any suspicions of specific wrong-doing, although the decision to ask for it can be triggered by a tip, complaint or referral. (Reporting by Sarah N. Lynch and Jonathan Spicer; Editing by Tim Dobbyn)
  2. the1


    Wow! I see some court battles in the near future.

  3. I guess when you do too much of anything, bad things happen.

    Uh-oh, spaghetti-o!
  4. "Trading code is a high-stakes secret for high-frequency firms that battle each other to earn razor-thin profits on tiny price imbalances in the market. Such firms can make thousands of trades per second and provide much liquidity to the market.

    High-frequency trading is estimated to be involved in more than half of all U.S. stock trading. Regulators have said the algos behind such trading were a factor in the flash crash, but that they did not cause it.

    Carlo di Florio, who heads the SEC's Office of Compliance, Inspections and Examinations, said the agency started asking firms for proprietary algorithmic trading data over a year ago, and has since more broadly incorporated such requests into its risk-based exams.

    Most of the algo-related requests, he said, have been made to hedge funds that use quantitative trading strategies.

    Although some lawyers and industry sources have said the SEC has asked for the actual computer code itself, di Florio said such a request is "very rare." Instead, most of the time the SEC has been asking for research papers containing sensitive information about trade reasoning and proprietary formulas."
  5. They should ask for Coca-cola's recipe as well...

  6. For causing a lot of tooth decay?
  7. the1


    And obesity. That's more of a threat to the US economy than HFT.

  8. Bob111


    about f**ng time. every time reasonably strong move occur in any direction-i see micro flash crash on stocks. liquidity providers my ass.
  9. Isn't high volitility and whipsaws up and down good for "trading"?
    I'm counting on the stocks trading in a range and not going up too much or down too much.
  10. wow, for any of you complaining about the "increased volatility" ("" because i'd argue that isn't true) that hft brings to the table is breaking your strategy... uh... learn how to not suck.
    #10     Sep 1, 2011