Thomson Reuters Changes FX Trading Rules on Its Platform to Discourage Manipulations

The new rules are seen as an attempt to prevent some forms of market abuse by high frequency trading algorithms

Thomson Reuters Thomson Reuters announced today the publication of a new proposed Rule Book applicable to the entire Thomson Reuters Matching community of 1,100 subscriber organizations, that the company says is designed to reflect a higher standard for acceptable trading behaviors in foreign exchange.

According to the announcement, the new rulebook was developed in consultation with market participants over the last 12 months and in response to detailed analysis of trading activity on Thomson Reuters Matching platform, in order to encourage behaviours that sustain primary markets.

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These include encouraging genuine interest at top of book, maintaining high certainty of execution and providing a fair and orderly trading experience for all market participants. Similarly, by raising the bar on expected trading behaviour the rules aim to discourage abuse, manipulation or disorderly conduct, as well as behaviours that do not enhance liquidity for the market as a whole.

The terms and language of the publication seem to refer to known techniques used by high-frequency trading (HFT) algorithms, such as flashing of fake prices for fractions of a second with no real intention to execute trades on the quotes but only to move the market in the direction that favors the HFT trader.

Phil Weisberg, global head of FX, Thomson Reuters
Phil Weisberg, Global Head of FX, Thomson Reuters

Phil Weisberg, Global Head of FX, Thomson Reuters commented on the announcement: “As an FCA-regulated trading venue, Thomson Reuters has a responsibility to guard that the trading behaviours and practices on its Matching platform comply with the Market Conduct rules that govern MTFs. Through a combination of platform controls and behavioural rules, the new updated Rule Book will seek to enhance liquidity for all clients trading on Thomson Reuters Matching. The proposed rules are based on feedback from detailed consultations with the market through the past year.”

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Thomson Reuters Matching includes platform controls that can influence trading behavior, including Minimum Quote Life that ensures longevity of orders in the book and gives counterparties a fair chance of trading those orders, and Minimum Tick Size that helps achieve the right balance between tight spreads and stability of prices.

The changes also introduce a proposed randomisation of order processing pilot to be run in a selected currency pair, to randomise execution and further facilitate a more equitable trading environment.

Additionally, Thomson Reuters is proposing a tightly defined set of trading rules that are intended to reduce the use of trading techniques that may lead to violations of Market Conduct Rules and are intended to foster genuine interest to trade and high certainty of execution.

According to the company, by issuing these new rules Thomson Reuters proposes a proactive, transparent and consistent approach to enforcement, including surveillance and reporting of client trading activity, client notification of activity that unless modified could lead to a breach of the rules and sanctions based on penalties other than the application of fines or removal of firms from the platform.

Mr. Weisberg added: “We take our responsibility to maintain a fair and orderly trading experience for all Spot Matching market participants very seriously and are adopting a leadership position in defining a higher standard for acceptable trading behaviours in FX. These proposed changes will benefit our customers by not only providing transparency in acceptable trading behaviours, but also transparency in the intentions behind our Rule Book changes.”

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