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Alternative Market Briefing

Germany passes bill to curb high frequency trading

Monday, October 08, 2012

Benedicte Gravrand, Opalesque Geneva – On 26 September 2012, the Federal Government of Germany published its official draft law to reduce the risks arising from high frequency trading (HFT). The HFT-Act constitutes a revision of the draft act published by the German Ministry of Finance dated 29 July 2012.

The new bill would limit high-frequency trading even for market participants outside Germany and requires automated orders to be marked as such, Bloomberg reported. High-frequency traders will have to seek authorization and will be supervised under the legislation proposal, an official told reporters in Berlin. High-frequency trade will be curbed and market abuse will be punished, he said. Hedge funds, which normally don’t need authorisation, will be covered by the new legislation.

According to international law firm Simmons & Simmons, some significant aspects of the HFT-Act and its amendments include:

New authorisation requirement: All entities which acquire or sell financial instruments on own account as a direct or indirect participant of a German organised market or multilateral trading facility and which apply an algorithmic trading strategy are subject to the new authorisation requirement. The Act provides for a transition phase......................

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