High-frequency firms organizing lobby group

Discussion in 'Professional Trading' started by ASusilovic, Dec 21, 2009.

  1. About 25 high-frequency trading firms have discussed forming a lobbying group within the Futures Industry Association as they move to deal with growing scrutiny in Washington, the association told Reuters.

    The firms have held a series of meetings in Chicago over the last two months, spurred by the prospect of a new transaction tax, commodity market position limits, and the possibility of a crackdown on high-frequency trading, the FIA said.

    The group has a draft mission statement but no name, it said. It is unclear how many proprietary firms will ultimately join the group, which is expected to be formalized in January, according to the association.

    "They will become an integral part of the FIA, and we will be aware of their issues," FIA President John Damgard said in an interview. "We will do everything we can to protect them from collateral damage from the administration" in Washington.

    High-frequency traders use rapid-fire algorithms to earn thin profits from market imbalances. Critics say this leads to market manipulation and instability, but defenders say there is little evidence of this.

    High-frequency trading accounts for about 40 percent of U.S. futures volume and about 60 percent of equities volume. It adds liquidity and has made trading cheaper and easier -- but more complicated -- over the last few years.

    The FIA represents futures dealers, investors, exchanges and others. FIA directors Donald Wilson, chief executive of DRW Trading Group, and Chris Hehmeyer, CEO of Penson GHCO, are organizing the high-frequency trading firms.

    The new group plans to meet on a quarterly basis and agree on five key issues it will ask the FIA to champion. A meeting is planned early next month.

    "They want to make sure they have the opportunity to define themselves," Damgard said.

    He cautioned that the new group and the FIA are not expected to agree on all issues. But he added, "In this particular legislative climate, many of the things that threaten individual firms threaten everyone."

    Group members would pay an annual fee based on head count, and would need to be FIA members.

    The FIA did not name the firms involved in the talks, which began in October. Four high-frequency trading firms separately told Reuters they were aware of the talks.

  2. They better hurry or congress will put them out of business.