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FIA European Principal Traders Association said it supports the overall direction and objectives of Germany’s proposed regulation on high-frequency trading. FIA EPTA looks forward to working with the German authorities to improve the proposals, for example with regard to the authorisation requirement, with an aim to create effective and efficient legislation.
Commenting ahead of the Bundestag Finance Committee’s hearing tomorrow on the draft regulation, FIA EPTA reiterated its backing for transparent, robust and safe markets with a level playing field for all market participants.
“We therefore support the proposal’s stated goal of maintaining the efficient functioning and integrity of financial markets in the face of technological progress and greater competition due to electronic trading and new trading venues,” said FIA EPTA Secretary General Mark Spanbroek.
“We generally endorse the proposal and believe a reasonable regulation of high-frequency trading to be appropriate, such as requirements on minimum tick sizes, enhanced transparency and order-to- trade ratios based on the respective class of instruments,” Spanbroek said. In addition, similarly to the German authorities FIA EPTA, is committed to combatting market abuse; in July 2012 FIA EPTA published recommendations for preventing market manipulation and improving risk controls.
FIA EPTA strongly supports the opinion of the Bundesrat to regulate high frequency trading in the Börsengesetz instead of in the Banking Act (Kreditwesengesetz) as currently proposed. Regulating high frequency trading in the Borsengesetz ensures all trading activities taking place on German markets by all trading participants is covered in a very effective and efficient way regardless where in the world the trading firm is located and whether the firm is a direct or an indirect member of an exchange.
Furthermore, the Backing Act would have detrimental effect on trading firms based in the EU that cannot receive MiFID authorisation as national regulation does not provide the possibility to apply for a MiFID passport. Not only would this drive liquidity away by excluding EU and US trading firms to trade on German markets it also pushes trading to non-transparent dark pools which is contrary to one of
the main objectives of EU regulation that has been put in place after the financial crisis in 2008.
FIA EPTA also noted that without high-frequency trading, MiFID would not have been as successful in opening up markets to new providers and therefore lowering trading costs. Automated trading also has facilitated the efficient access to capital for companies at low costs, it said.
“These positive aspects should be recognised within the German proposal to regulate high-frequency trading,” Spanbroek said.
