The Regulators Get It!
“Five HFT firms have told Reuters they are holding back new investments given the uncertainties surrounding the proposed regulations.”
“”We were about to set up a new strategy and we were ready to deploy capital, and build a team of traders and programmers, but if these changes are implemented that strategy would effectively be zero.”
“[The Regulator] noted that while literature existed showing algo trading helped tighten spreads and boost liquidity, research also showed it may raise costs for non-algo traders and increase the risk of “flash crashes”.
“[The Regulator] is looking at potential limits on so-called algo traders, including “speed bumps” to randomly delay execution of some orders, and forcing exchanges to take orders from co-located servers and other sources alternatively, removing another advantage enjoyed by HFT platforms.”
Seems very encouraging! Minimum resting times, order randomization, auctions, and curbs on exchanges selling private tick by tick data are on the table. And the Regulator has opened up their proposals for speedbumps and minimizing speed advantages to public comment – which they got in troves. Unfortunately, all of the comments they received were from one side, and “sponsored.” Said one regulator:
“Those are all sponsored comments. We plan to have a detailed open consultation. We have an open mind. We will consult everyone,” he said. “We will do something. We are not worried about sponsored comments. You cannot browbeat us just because you are powerful and noisy,”
Also encouraging! They won’t back down! Even despite the slew of commentary coming from lobbyists and “sponsors”.
There is only one problem, though. This regulator is not in the United States. It is in India.
Here are two articles with more detail:
Why don’t we experience the same investor-oriented bias in the United States? Who knows? Maybe it has something to do with revolving door influence… like, for example, Trading and Markets executives leaving the SEC – with intimate knowledge of the SEC’s surveillance usage of MIDAS (Manoj Narang’s system sold to the SEC) – and going to extremely large high frequency trading firms.