High frequency trades most important regulatory issue, US traders say

10 January 2011

High frequency trading (HFT) is the most important regulatory issue for half of US traders in institutional equities, a new report has shown.

A study by the TABB Group suggested that this means increasing numbers of long-only trading desks are looking to be more rigorous in terms of the controls, monitoring and transaction cost analysis surrounding the trades.

Matt Simon, senior analyst and author of the study, said that 30 per cent of trades by long-only companies are being undertaken via a broker algorithm.

“Performance, brokerage relationships and liquidity access are the leading drivers for deciding which broker algorithms should be used and how commissions would eventually be allocated,” he explained.

Mr Simon added that changes within order flow allocations will be influenced by allocation changes and the adoption of enhanced electronic trading systems.

HFT has come increasing scrutiny since the Securities and Exchange Commission launched an investigation into automated trading processes following the ‘flash crash’ which occurred in the US last year.

The TABB Group research questioned 68 head traders from US institutional equity firms responsible for maintaining a total of $12.9 trillion in assets under management

By Jim Ottewill

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