Cracking down on market abuse: can high frequency traders be reined in? | Video
European CEO speaks to Richard Metcalfe, Director of Regulatory Affairs at the Investment Management Association in London, to find out how new MiFID rules will deter market abuse, and whether governments are levelling enough criminal charges against high frequency traders
In recent years, high frequency trading has perturbed and disturbed the finance world. Those profiting from such practices are rarely known by name, but their impact is felt with every microsecond trade they make. European CEO speaks to Richard Metcalfe, Director of Regulatory Affairs at the Investment Management Association in London, to find out whether the Wild West of HFT can ever be reined in.
European CEO: The MiFID 2 proposals that have been put forward; are they sufficient to protect market participants from high frequency trading abuse?
Richard Metcalfe: I think the honest answer is that they may be.
There has been a rise in high frequency trading over the past few years. Our few has generally been that speed in itself is a function of markets; it’s when it can be combined with other factors that it can become problematic, if you like, to price formation. To true price formation.
There’s always going to be a challenge in terms of enforcement
European CEO: Now are European governments levelling harsh enough criminal charges against market abuse related to HFT?
Richard Metcalfe: There’s always going to be a challenge in terms of enforcement. Because you have a data challenge, there. Now that can be managed, but it requires consistent effort to keep up with the best possible IT to support your activities.
But I think the political intent is very clearly signalled, and I think that’s actually very helpful.
You’ve had updates to the market abuse regime. You’ve got a major and very visible focus on the way that benchmarks are run – in fact there’s been an announcement from the UK government today that they’re looking at extensions to the regime that already takes in Libor.
So, yes – I think that the focus is there, but it will always be a challenge to make sure that it’s fully enforced. But it needs to be, because if it isn’t, the investors, including the individual savers, will lose confidence. So yeah, there’s a lot that hangs on this.