Software firm Cinnober brands fast trading curbs ‘populist

Technology provider Cinnober Financial Technology has criticised moves by the European Parliament to curb high frequency trading, saying they are ‘populist’ and backed by ill-informed politicians.

The criticism from the software company comes after the European Parliament voted last week to require fast traders to make sure their orders are valid for at least half a second.

HFT has come under attack on various fronts, from trade bodies to longer-term asset managers, as serving little investment purpose and not providing useful liquidity to financial markets.

On some estimates HFT is behind 40% of trading volume in Europe.
Nils-Robert Persson, executive chairman of Cinnober, said preventing any “potential abuse of HFT” was well-intentioned, “but ‘populist’.

“Many of the people who recently pressed their voting buttons might not truly understand the technical challenges and opportunities of today’s financial marketplaces. A larger role for technology is in general positive for our society, for example, by lowering entry barriers to new and innovative financial marketplaces, thus creating competition.

Other critics of the latest proposals have argued a minimum order holding period of half a second would simply force traders to target exactly that time period, when timing how long they kept orders valid in the market.

The effective curbs of HFT were just some of various proposals voted on by the European Parliament last week. It also advocated regulatory peak body the European Securities and Markets Authority be given powers to ban financial products that could threaten confidence or stability.

Markus Ferber, who headed up work on the papers behind the vote, said the proposed rules would “protect taxpayers and consumers”.

Under the proposals backed last week, traders would also face higher fees if they withdraw too many orders, unfilled, from the markets.

A final set of rules around such measures must be agreed on by the assembly and national governments, before they take force.

Persson said many of the plans set out were “more or less old stuff”.

He highlighted here making traders and trading venue operators provide clear rules and procedures for fair and orderly trading, and objective criteria for executing orders efficiently and transparent criteria for determining which financial instruments may be traded via their systems.

“Hardly anyone would speak against it and the technology has been available for ages, at least from some of us.”

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