Ja­pan to tighten high-fre­quency trad­ing rules

The Sun (Malaysia) - - SUNBIZ -

TOKYO: Ja­pan plans to tighten reg­u­la­tions on high-fre­quency trad­ing (HFT), whose grow­ing pres­ence in the Tokyo Stock Ex­change has raised con­cerns such trades could desta­bilise the market and put re­tail in­vestors at a dis­ad­van­tage.

Reg­u­la­tors in Europe and else­where are also plac­ing high­fre­quency traders, who use ul­tra-fast com­put­ers to au­to­mat­i­cally place trades, un­der closer scru­tiny as they have been blamed for ac­cen­tu­at­ing market volatil­ity.

Ja­pan’s market reg­u­la­tor, the Fi­nan­cial Ser­vices Agency, made pub­lic yes­ter­day its plan to re­quire high-fre­quency traders to regis­ter and to en­sure proper risk man­age­ment mea­sures are in place.

HFT ac­counted for about 70% of or­ders placed at the Tokyo Stock Ex­change in 2016, FSA said.

“It is not ap­pro­pri­ate to elim­i­nate all al­go­rith­mic fast trad­ing from the Ja­panese market as it in­cludes the kind that con­trib­utes to smooth market trans­ac­tions,” FSA said in ma­te­ri­als handed out at its work­ing group dis­cussing the is­sue.

The agency said, how­ever, it needs to have a tighter grip on HFT given con­cerns raised by market par­tic­i­pants that these high-speed au­to­matic trades could desta­bilise market.

Oth­ers were wor­ried that re­tail in­vestors with­out ac­cess to such ser­vices might feel dis­ad­van­taged and thus stop par­tic­i­pat­ing, FSA said.

Reg­u­la­tors in other coun­tries have high­lighted sim­i­lar con­cerns. HFT will be di­rectly reg­u­lated by the Euro­pean Se­cu­ri­ties and Mar­kets Author­ity (ESMA).

In­dia’s cap­i­tal market reg­u­la­tor in Au­gust said it was look­ing at var­i­ous po­ten­tial lim­its on so-called algo traders, in­clud­ing im­pos­ing “ran­dom speed bumps,” which would ran­domly de­lay ex­e­cu­tion of some or­ders. – Reuters

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