U.S. SEC paper Concept paper could lead to crackdown on High Frequency practice

Discussion in 'Professional Trading' started by ASusilovic, Jan 7, 2010.

  1. * Concept paper could lead to crackdown on practice

    * SEC to also consider rule on broker risk management

    WASHINGTON, Jan 5 (Reuters) - U.S. securities regulators will meet on Jan. 13 on whether to publish a concept paper soliciting comment on a range of equity market issues, including high frequency trading and "dark" liquidity, the Securities and Exchange Commission said on Tuesday.

    The SEC posted the agenda to its website and said it will also consider whether to propose a new rule regarding risk management at brokers or dealers that provide market access.

    The agency has recently stepped up its efforts to police high-frequency trading and other trading techniques amid complaints that it can lead to manipulation and unstable markets.

    SEC Chairman Mary Schapiro has said the agency will propose rule changes if it receives significant concerns after the paper is issued.

    High-frequency trading, which accounts for some 60 percent of U.S. stock trades, involves using algorithms to buy and sell shares and earn tiny spreads on market inefficiencies.

    The SEC also has said it is examining so-called naked sponsored access, where brokers allow trading firms to use their license, giving them unfettered access to markets.

    Proprietary firms, banks and hedge funds employ high-frequency strategies, which include statistical arbitrage. (Reporting by Karey Wutkowski; editing by Carol Bishopric)

  2. They should make it clear what type of HFT they are trying to ban. It should not be illegal to make thousands of trades a day. On the other hand, flash trading as it relates to HFT is clearly front running, plain and simple.
  3. that the brights put out garbage like that, is just mind-boggling. next time you guys want to blame someone for sub-pennying, don't blame 'high frequency traders' because um, that's what bright and most all prop traders do... so um, that would be kind of fucking idiotic. didn't you guys just start an automated pairs trading program... just what exactly do you think that is? algorithmic medium frequency trading? just what good do you think will come of blaming high frequency traders (ie, you, us) for sub-pennying?

    seriously, would really like to hear the logic behind this. anyone from bright who'd like to chime in as to why you're demonizing your own industry would be appreciated.
  4. But if you follow the logic, not that I'm sympathetic to anyone here.. but how are any of these daytrading shops making money if an algo is coming in and beating them - they are toast. Bye Bye Swift, Bright, etc....

    That aside, is anyone else in the daytrading area losing their profitability? (I don't daytrade myself)
  5. Daytrading is still profitable but the competition from algos has removed some of the "free money" available.

    I think the issue with sub-pennying is that it's unfair competition, in that broker-dealers can go to 1/100ths whereas most traders are limited to penny spreads. Imagine if when bidding on a house you could only use $10k incremements whereas someone else could use $100 increments, for example. There should be a level playing field.