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Alternative Market Briefing

Explosive growth in high frequency trading means SEC analysis will likely be focused on systems and practices soon to be archaic

Monday, November 23, 2009

From Kirsten Bischoff, Opalesque New York:

As calls for financial reform gained speed during 2009, one area that seemed to stay under the radar was high frequency trading (HFT), a fact that changed dramatically during the late summer and early autumn. Stepped up media coverage of what was typically described as an insidious and uncontrollable market force sparked cries for targeted regulation and in late October the SEC announced it would begin collecting "baseline information" about HFT activities.

In what might be described by some as a witch hunt environment, high frequency traders gathered last week in Manhattan for the Automated, Algorithmic & High Frequency Trading event, sponsored by The Mankoff Companyto discuss the current environment and future expectations for high frequency trading and the regulation facing it.

What was clear from the panelists' discussions is that regulation will likely cause some frustration, or as one manager said, as HFTs work to knock off microseconds the government is looking to add milliseconds. However, it also became clear that it is likely by the time the SEC finishes printing its report on HFT activities the information will be focused on systems which will already be considered archaic.

The use of phrases such as "the next arms race is being played out" might best illustrate the fierce competition to gai......................

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