Germany Aims to Reduce HFT

According to the Wall Street Journal, Germany will advance a bill on Wednesday which imposes a new set of rules on high-frequency trading on the country's exchanges. The new measures escalate Europe's response to curb high frequency trading. The Journal reports that the "measure seeks to require traders to register with Germany's Federal Financial Supervisory Authority, collect fees from those who use high-speed trading systems excessively, and force stock markets to install circuit breakers that can interrupt trading if a problem is detected." The rules will be universal for traders no matter where they are based, and under the measures, a regulator can compel a firm to detail its trading practices. Although the bill is "widely expected to pass later this year," according to the Journal, it needs to be approved in the cabinet before moving to the Bundestag. Estimates suggest that high-frequency trading strategies now account for around 40 percent of the activity on German exchanges. A senior official from the German finance ministry told reporters that "The goal of the German law is to limit the risks associated with high-frequency trading." The new measures by Germany follow in the footsteps of France and the European Union which have taken steps to regulate high-frequency trading. A vote expected on Wednesday at the European Parliament will determine the body's position on a number of new rules, such as requiring orders to rest in the order book for a minimum time period of half a second and penalties for high cancellation rates. In France, on Aug 1, a high frequency-trading tax was implemented as part of a financial-transaction-tax package.