High Frequency Trading Firms Talk Relevance and Need

Banking, finance, and taxes

Published: October 9, 2014 1:50 pm

Many investors have grown to hate the world of high frequency trading firms. Other investors accept them, and some even praise them. A group called the Modern Markets Initiative, or the MMI, has introduced the “Principles for Effective Modern Markets.” The MMI is an electronic markets advocacy organization and the principles are meant to be “a framework designed to guide the critical, ongoing review of (our) financial marketplace and its impact on investors.”

As you would expect, the work is in favor of high frequency trading firms and related entities. The MMI represents high frequency trading firms, and its framework consists of three key views: 1) simplicity and transparency, 2) equal access to markets over special access and 3) responsible regulation.

What investors may not know about this group is that a former U.S. Commodity Futures Trading Commission (CFTC) commissioner, Bart Chilton, is currently an advisor to MMI. Chilton agrees that an effort by industry voices to embrace and promote sound regulatory policies such as program testing and “kill switches” would help advance the universal goal of a more efficient marketplace.

Bill Harts, CEO of the Modern Markets Initiative, noted high frequency trading now accounts for 50% of all trading in the United State. Harts said:

We agree with investors that markets should be simple to use and easier to understand. A transparent market leads to a more efficient market. A more level playing field without unnecessary barriers is crucial to competition, and competition saves all investors money. When market rules and regulations are clear, fair and enforced, investors both big and small are well-served.

Bart Chilton said in this latest release:

If we’re going to shape a better financial marketplace, we’re going to have to embrace a balanced approach. These principles demonstrate a willingness to work with regulators to give investors a greater sense of confidence about today’s trading environment.

The “Principles for Effective Modern Markets” talks about market efficiency, fair and equal access, transparency, competition, market stability, simplicity and sound regulation. Here is the full detail on each of the principles.

Again, many investors see the high frequency trading world with extremely different views.

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