European regulators have promised the ‘strictest regulations for high frequency trading in the world’ ahead of the approval of a vote on Markets in Financial Instruments Directive (Mifid) later today.
While the rules have been in development for years, the issue has been lent impetus by the publication of Flash Boys by Michael Lewis, a comprehensive survey of the sector’s development.
The draft rules, which will go before the European Parliament today, will require algorithms to be tested and monitored by regulators and ensure order increments do not fall below a certain size.
Rules which would have installed a minimum holding period, making it difficult for trading programmes to operate, were dropped last year, however.
Michael Lewis’ Flash Boys has drawn a spotlight to the hitherto secretive world of high frequency trading, blamed for the lightning speed of the flash crash of 2010.
Lewis claimed that the sector was ripping off small shareholders by exploiting millisecond response times to affect the price investors were able to secure in the market.