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By Beverly Chandler, Opalesque London:

Clifford Chance has published a paper on the draft act from the German Federal Ministry of Finance (BMF) on high frequency trading. Clifford Chance partner Christopher Bates explained the BMF has published the draft Act for consultation to prevent risks and misuse of high-frequency trading.

The key points are:

• an extension of the definition of proprietary trading to cover high-frequency-trading, which will make high-frequency traders subject to the supervision of the Federal Financial Supervisory Authority;
• the introduction of information requirements to regulators on the strategies of various algorithmic traders – high-frequency traders have to take responsibility for their trading systems to prevent market disruptions;
• a clarification of the scope of market manipulation to include non-transaction-related trading activities if they impair or delay trading systems or deceive other market participants;
• rights for exchange operators to charge a fee in case of excessive use of the exchange trading systems;
• limitation of the order per transaction ratio, on how many orders per transaction participants can place;
• minimum limits for sizes by which prices may rise or fall ('tick size’); and
• an extension of these rules to multilateral trading systems.

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