11:39 AM
A High-Frequency Trader Fights Back
With European politicians threatening high-frequency trading as we know it through proposed regulations and inflammatory rhetoric that's hardening the public's negative view of the practice, at least one industry official appears to have had enough and is fighting back.
I've previously argued that high-frequency trading firms are losing the public relations battle in the aftermath of the Flash Crash of May 6, 2010, but maybe the tide is beginning to turn. .
In an interview with Financial News , Remco Lenterman, the managing director of the Dutch firm IMC, argued that academic evidence showing the benefits of high-frequency trading is overwhelming and that its critics aren't being driven by facts.
"So much of what is being thrown at the industry is anecdotal at best and fabricated at worst," Lenterman told Financial News. "The academic evidence that supports the benefits of HFT is overwhelming. Unfortunately we are in a political climate where the evidence is not relevant." Lenterman is also chairman of the European Principal Traders Association.
Financial News reported that Lenterman's remarks followed a proposal by the French senate to tax high-frequency trading. French President Nicolas Sarkozy is leading a push across Europe for a financial transaction tax that's projected to help the continent's cash-strapped governments raise $78 billion a year if it's passed.
A similar measure was proposed in the U.S. by two Democratic lawmakers , though it has little chance of passing.
Proponents of HFT argue that not only does it lower spreads and help traders get in and out of positions more quickly, it also speeds up the arbitrage process for stocks, exchange-traded funds and certain derivatives. The efficiency it adds to the equities marketplace can also be replicated in the trading of futures and bonds, supporters say.
On the flip side, critics remain spooked about the quick disappearance of liquidity during the Flash Crash, and the widespread volatility that's become the norm.
As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio