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SEC will ban « flash trading »

Beyond the flash trading, the overall high-frequency trading strategies face scrutiny

Article also available in : English | français

Charles Schumer, a U.S. senator who has campaigned for weeks for banishment,is said to have obtained the guarantee of Ms. Mary Schapiro, Securities and Exchange Commission (SEC) chairman, regarding the future prohibition of such type of trading in the U.S. States.

The "flash"trading is a service for which the major brokers give for a few seconds, access to all market orders to some of their preferred customers. Direct Edge, Nasdaq, Bats and CBOE are currently amongst those offering this service to their members.

Flash trading volume would account for 2.4% of U.S. equities trading according to data compiled by Rosenblatt Securities as of June. Many analysts believe that it is a privileged access granted to some market players at the expense of retail and individual investors.

More generally, the Senate plans to study more closely all high frequency strategies and legislate if needed.

Goldman Sachs, one of the most active banks in this field, has sent a letter to all its customers to explain for what purposes the bank uses this type of trading.

High frequency trading has accounted for up to half the volume of trading U.S. equities this year. According to its advocates, it contributes to narrow bid-ask spreads, to lower brokerage fees, to improve the speed of execution and better market efficiency.

Next Finance , August 2009

Article also available in : English | français

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