25 October 2014

Germany's HFT licensing plans draw market criticism

15 January 2013  |  4269 views  |  0 German flag

High-frequency traders and exchange operators have spoken out against German government plans to make HFT practitioners obtain prior authorisation to operate.

Although the EC is currently in the process of tightening rules on computer algorithmic trading as part of its MiFID overhaul, the German government has taken its own, tougher, steps.

With parliament's finance committee set for a hearing on the draft law tomorrow, the FIA European Principal Traders Association (EPTA) has backed many of the proposals, including requirements on minimum tick sizes, enhanced transparency and order-to-trade ratios.

However, the association has warned that the plan to introduce a licensing system for high-frequency traders "would have detrimental effect on trading firms based in the EU that cannot receive MiFID authorisation as national regulation does not provide the possibility to apply for a MiFID passport."

Continues a statement: "Not only would this drive liquidity away by excluding EU and US trading firms to trade on German markets it also pushes trading to non-transparent dark pools which is contrary to one of the main objectives of EU regulation".

With around 70% of trading on the Xetra cash equities platform involving foreign players, Deutsche Börse is also against the plan, with MD Rainer Riess telling the Financial Times that the operator is "very concerned" and that a registration requirement "would be an own goal for Germany's financial centre".

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