The Gateway to Algorithmic and Automated Trading

Lobby group tells Brussels: We need facts, not emotion

First Published 8th May 2012

The FIA European Principal Traders Association weighs in on MiFID II with a call for regulation based on facts, not emotion

Brussels - The FIA European Principal Traders Association fired off a salvo towards European regulators, calling for them to not be swayed by "emotive" language surrounding high-frequency trading and arguing trading venues, as opposed to bureaucrats, should be left to determine order-to-trade ratios.

As debate over the review of the EU's Markets in Financial Instruments Directive (MiFID II) is starting to heat up, the FIA EPTA weighed in with a policy paper arguing for a "comprehensive regulatory framework" that recognised the value that principal trading firms bring to the marketplace.

In a briefing held in Brussels, the FIA EPTA said it supported open markets along with pre- and post-trade transparency measures and on-exchange trading. It also said it wanted trading venues and market participants to have robust risk controls in place to address risks inherent in electronic markets as well as ESMA's guidelines on systems and controls in an automated trading environment.

It called for "well-calibrated order-to-trade ratios determined by trading venues to ensure orderly trading on their platforms".

MiFID II is easily one of the most talked-about subjects in the algorithmic trading community as it has the potential to reshape a wide spectrum of financial activity. Groups such as the FIA EPTA are trying to influence the debate over the proposed measures.

What is less clear is to what extent EU regulators will readily listen to calls for anything remotely like self-regulation.

Still, the FIA EPTA argues it has facts on its side.

"It's time to bring more balance to the HFT debate, which until now has been driven by emotive language, anecdotes and fabrications rather than hard fact," FIA EPTA chairman Remco Lenterman said in a statement.

"For example, many people don't realise that market abuse - as well as being morally reprehensible - comes at a hefty price for the market. So principal trading firms such as our members have a very real economic incentive to fight market abuse and back regulatory reform," Lenterman said.

Overlooking value

Lenterman said the industry's critics chose to overlook the value that principal trading firms add to the real economy in terms of lower transaction costs and greater liquidity.

FIA EPTA represents firms that trade their own capital in the European exchange-traded markets. The association estimates that its members are responsible for a substantial part of the traded volumes on European exchanges and multilateral trading facilities.

"We strongly support measures that ensure safer, more resilient markets, but we urge policymakers to carefully weigh the costs of such measures. No one benefits if badly designed regulations disrupt liquidity and drive up costs for traders and investors," Lenterman said.