Hong Kong’s financial regulator is the latest watchdog to give automated trading a run for its money. The regulator has drafted a consultation paper which outlines significant procedures it intends to implement to ensure domestic markets do not suffer from the growth in automated trading.
The new proposals want automated trading systems to be tested (at least annually) and ensure brokers take responsibility for the soundness of their IT systems to prevent erroneous trades entering the market.
The NFA can learn from the latter part as it fined Alpari US for a system fault.
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High Frequency Trading was blamed for the DOW Jones flash crash; global regulators have been slow to respond as the UK’s FSA was the only major regulator who took a lead to ensure the events don’t repeat.
Germany addressed the High Frequency dilemma and is sending the message loud and clear ‘it does not want rogue traders’ who trade in and out with systems that spoil the efficiency in the market.
Algorithmic trading is the new trend as retail and professional traders can turn on systems to do their job even when they are asleep. As the use of automated trading increases we will see a direct correlation in daily trade volumes.