New Study To Assess Impact of High Frequency Trading in Canada Commences 3rd Phase

High frequency trading continues to actively function in global financial markets, Canada is the latest developed nation that is embracing the new automated trading approach. With the trading style gaining popularity among participants, the country’s financial regulator, the Investment Industry Regulatory Organization of Canada (IIROC) will be carrying out an investigation into the dynamics of HFT. The authority will be allocating the study to five project teams, the firm reported that its selection of all teams has been completed. The regulator joins its counterparts in Australia, the UK and Germany, with each having carried out studies on the matter.

The study follows on from new rules that were implemented two years ago in 2012, where the regulator introduced guidelines rules relating to dark Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term and the general HFT arena.

Susan Wolburgh Jenah, IIROC President and Chief Executive Officer, commented about the study in a statement: “We believe it’s important to address identified regulatory concerns relating to HFT using empirical data and objective study to better understand its impact on market integrity and quality, as well as overall investor confidence. This research, combined with IIROC’s ongoing work, will help to inform any further policy making or regulatory interventions.”

The watchdog's latest study is the third phase of its review of HFT. It follows the publication of the first two phases of the study in December 2012 which objectively identified a study group of traders and offered a detailed, statistical analysis of their activity. IIROC’s HFT Study will complement other initiatives already adopted by IIROC to govern high frequency and algorithmic trading. In particular, in 20I3 IIROC issued guidance on manipulative and deceptive trading.

The regulator states that the investigations are assessing the impact of the dark liquidity rules introduced in Canada in October 2012 on high frequency traders and the market as a whole, with a focus on the impact on price efficiency, price discovery and price Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term. The second will examine liquidity provision and market making by high frequency traders, focusing on how these traders avoid being adversely selected.

HFT is a by-product of electronic-trading in financial markets, it has become a common practise in developed countries as exchanges and trading venues accommodate fast -traders by having low latency systems that execute and confirm orders in micro-seconds.

Results from studies carried out by authorities in Australia and the UK showed that HFT does not harm financial markets.