The Futures and Options Association is participating at a key event today in the European Parliament on algorithmic and high-frequency trading, and direct electronic access to markets.
The invitation-only QED Communication event, sponsored by FOA and hosted by Swedish MEP Olle Schmidt, comes just two days before the 10th May deadline for MEPs to submit their amendments to the MiFID review. The ECON MEPs and assistants, permanent representatives and Commission officials at the event will hear presentations and discussions about algorithmic trading and the differences between algorithmic and high-frequency trading. Market participants, including FOA member Antonio Reyes, Global Head of Electronic Execution Products and Listed Derivatives at Citigroup, will also highlight industry steps to provide proper safeguards around such activities.
FOA has been actively engaged with members of the European Parliament to achieve appropriate legislative outcomes, which include support for a prohibition of ‘naked’ or ‘unfiltered’ sponsored access and a call for a refined definition of algorithmic trading rather than a definition of high-frequency trading.
Key aspects of FOA’s proposals are:
- ‘Naked’ or ‘unfiltered’ sponsored access should be prohibited;
- Minimum resting times are counter-productive in reducing risk so are not supported;
- Trading venues should manage capacity with controls to messages rather than apply order to trade ratios or higher fees for cancelled orders;
- Slowing down order flow is not an effective venue capacity control and could exacerbate disorderly trading;
- A refined definition of algorithmic trading is more workable than defining high-frequency trading;
FOA Executive Director Regulation, Kathleen Traynor says, “The FOA is dedicating a lot of its resource to ensuring the trading and markets issues are properly clarified. There is a lot of complexity here and we need to explain ourselves clearly and avoid unhelpful jargon. We are pleased to assist in the education process in this critically important area.”
Antonio Reyes, Citi’s Global Head of Electronic Execution Product Development for Listed Derivatives, says, “Clearly the European Parliament is in the process of a hugely important review of MiFID, so we are pleased to be working with the FOA to ensure the issues are well-understood. In particular, the way in which end users access exchange-traded derivatives markets has evolved greatly over the years, as technology has facilitated more efficient access channels. We’ve done a lot of thinking internally about our own ‘best practice’ approach in this area, and welcome the chance to have a dialogue with key decision-makers.”
The FOA is the European industry association for more than 160 firms and institutions engaged in derivatives business, particularly in relation to exchange-traded transactions. Membership includes global investment banks, brokerage houses and other financial institutions, commodity trade houses, power and energy companies, exchanges and clearing houses, as well as a number of firms and organisations supplying services into the futures and options sector.