The UK government is supporting a new study into the impact of high frequency trading on market stability and the UK economy.
Today, over one-third of the UK's equity trading volume is generated through high frequency automated computer trading while in the US this figure is closer to three-quarters.
The Foresight project, sponsored by HM Treasury and led by the Government's chief scientific adviser, Professor Sir John Beddington, will explore how computer generated trading in financial markets might evolve over the next decade or more, and how this will affect:
- financial stability;
- integrity of financial markets, including price information and liquidity;
- competition;
- market efficiency in allocating capital;
- transaction costs on access to finance; and
- future role and location of capital markets.
Says Beddington: "It's essential to develop a better understanding of how computer trading in financial markets might evolve, in order to help protect the UK and other economies against technology-led economic instabilities."
A high level stakeholder group will be appointed to steer the overall direction of the project, chaired by the financial secretary to the Treasury Mark Hoban. Members of the steering group include the Bank of England's Andy Haldane, Kevin Houston of FIX Protocol and a number of leading academicians.