The American stock exchange is accused of illegally granting benefits high-frequency traders
Material posted: Publication date: 21-01-2018
In 2014 he published a book by Michael Lewis “Flash Boys” — it tells about the structure of the industry of high-frequency stock trading and described are not always completely honest methods used by traders. The book became a bestseller and caused a wide public resonance.

Moreover, she traces the activities of high frequency traders interested in power, some HFT firms have been sued. No visible results of this activity in that period was not followed, however, as it became known edition of the Hill, the trial is still going on.

Claim 2014

Regulators and lawyers, after the release of ‘Flash boys’, began to check the exchange to provide benefits to the HTF traders. According to the charges, the exchange has created the conditions under which such traders have trade data earlier than the others, which allowed them to use the tactics of frontrunning to manipulate prices. The share of HFT currently accounts for the majority of trading volume on the U.S. exchanges, so trading platforms are interested in attracting such players.

In addition to filed in 2014, lawsuits, regulators have taken a number of actions aimed at strengthening control over HFT. So the Commission on securities and stock exchanges of the USA (SEC) has developed the website of the Department on presentation of data and analysis of market structure. Later, the Agency invited experts on trade and created the Advisory Committee on the structure of the stock market (EMSAC), which dealt exclusively with high-frequency traders.

What is happening now

The Federal U.S. court of appeals on December 19 again has restored a lawsuit against several exchanges, including the NYSE, NASDAQ, BATS Exchange and the Cboe. At the moment, representatives of stock exchanges have not reacted to the accusation, although previously denied his guilt.

The lawsuit alleges that the exchange, knowing the consequences, provided HTF firms faster access to trading data, to the detriment of other investors. In turn, the exchanges argue that colocation of traders in the same data center that the exchange's trading system, as well as a direct connection meet the standards of SEC.

They also argue that HFT firms have invested heavily in the development of financial technology that enables them to compete for trading volume, enhance liquidity and increase market efficiency for all investors.

Meanwhile, EMSAC is studying various aspects of the activities of HFT for several years, but has not yet provided a clear justification of charges in frontrunning.

Representatives of organizations of Modern Markets Initiative, which supports high-frequency traders pay attention to the fact that it was not received clear explanations about the claims to HFT trading, and how the scheme of FrontRange described in the book "Flash Boys", can work in the current market structure. In addition had received information from other market participants who can attest to that imposed on traders, the prosecution had indeed taken place.

According to the President and CEO of CFA Institute Paul Smith (Paul Smith), these questions need to be answered once and for all, as the topic of confidentiality and trust to the market cannot be ignored. Financial technologies is extremely important for trading, but not when they are used to manipulate the market.


Tags: assessment , USA , Exchange