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April 29, 2013

High-frequency traders face speed limits

High-frequency traders are facing “speed limits” for the first time on a major trading platform, under a proposal that is being touted as a template for a regulatory clampdown on computer-driven activity.

EBS, one of the two dominant trading platforms in the foreign exchange market, is suggesting scrapping the principle of “first in, first out” trading, which it says gives an unfair advantage to the fastest computers and has led to an arms race of spending on technology.

Instead, under the plan, incoming orders would be batched together and dealt with in a random order.

“’It is a technology arms race to the bottom, and a huge tax on the industry, since people are having to make significant investments in speed without any connection to their trading strategy,’ said Gil Mandelzis, EBS chief executive. ‘Speed has little to do with why many participants come to our markets. These are serious players who come to the market to exchange risk; they do not come to race.'”

High-frequency trading, or HFT, has triggered controversy across financial markets, with many large investors complaining that it has increased the complexity of doing business.”

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Read full Financial Times article here

 
 
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