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April 16, 2014

Lawmakers Back High-Frequency Trade Curbs in EU Markets Law

“High-frequency traders in the European Union are set to face some of the toughest rules in the world, after legislators backed rules that they said would curb volatility and make markets safer.”

The limits include standards meant to keep the price increment for securities from being too small, mandatory tests of trading algorithms and requirements that market makers provide liquidity for a set number of hours each day. The curbs are part of revamped EU markets legislation approved yesterday by the European Parliament voting in Strasbourg, France.

“The price increment rules and other measures requiring trading to stop if “price volatility goes beyond a certain level” will slow down high-frequency trading “to a more manageable pace,” Markus Ferber, the legislator who led the assembly’s work on the standards, said in an e-mail before the vote.”

“High-frequency trading in stocks grabbed headlines after the plunge known as the flash crash in May 2010, during which the Dow Jones Industrial Average briefly lost almost 1,000 points. Controversy returned with the publication of Michael Lewis’s book “Flash Boys” on March 31. Lewis argues that the $22 trillion U.S. stock market is rigged in favor of speed traders, who he says prey on slower investors by getting faster access to information.”


Read full Bloomberg article here.

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