Kaufman on HFT Order Tags

Zerohedge today makes the point, with Senator Kaufman, that the order tag data should be public domain, and not held in a vault where it may or may not be analyzed by folks that may or may not be equipped to analyze it.

Kaufman Applauds SEC on Decision to Consider a Proposed Rule Requiring High Frequency Traders to “Tag” Trades

Commission expected to take up matter at April 14 meeting

April 7, 2010

WILMINGTON, Del. — Sen. Ted Kaufman (D-Del.) released the following statement today in response to news that the Securities and Exchange Commission (SEC) will consider on April 14 a proposed rule that for the first time would require high frequency firms that trade over a certain volume threshold to identify and report their trades to the Commission.  The rule is being considered under the SEC’s existing “large trader” reporting authority.

“I applaud the SEC for moving forward with a proposed rule to require tagging of high frequency trades. This is the first step to ensuring the SEC can better understand high frequency strategies and detect any manipulative algorithms. As I have said, the need for transparency and fairness trumps liquidity.

“I further believe the Commission should mask the proprietary nature of this data and release it to the marketplace – or at least to academics and private analytic firms under ‘hold confidential’ agreements – so that independent analyses can be conducted on this data to assist the Commission in determining whether certain algorithmic trading strategies are illegal under existing anti-manipulation law.

“The Commission, Congress and industry all must work together — in the interests of liquidity, efficiency, transparency and fairness — to ensure our markets are the strongest and best-regulated in the world. But we cannot have one without the other — for markets to be strong, they must be well-regulated.”

In a Nov. 20 letter to SEC Chairman Mary Schapiro, Kaufman urged the Commission to move forward with a “large trader” reporting proposal, asserting “we simply cannot permit high frequency practices to continue unchecked without the ability of regulators to observe and stop manipulation.”  In her Dec. 3 response, Chairman Schapiro assured Kaufman that the Commission would soon put forth such a proposal in order to gain “better baseline information about high frequency traders and their trading activity.”