* Nowotny wants proper resources for ECB supervisory role
* Would welcome eastern European countries in programme
(Adds comments on high-frequency trading)
VIENNA, Sept 13 European Central Bank
policymaker Ewald Nowotny called on Thursday for a regulatory
ban on high-frequency trading, saying the technique of using
computer algorithms to generate multiple high-speed trades had
no practical value.
A day after the European Commission proposed putting the ECB
in charge of supervising euro zone banks, Nowotny said it might
be better to have clear bans on some financial market activity
rather than an approach that leaves banks scope to seek
"For example with high-frequency trading there is nothing to
be regulated, it is to be banned. There is no really
demonstrable net advantage from this (form of trading)," he told
a panel discussion at a regulatory conference.
Nowotny, who heads the Austrian National Bank, has no power
to implement such a ban, although his comments come at a time
when the ECB is being lined up to take a more influential role
in supervising banks.
There has been a growing backlash against high-frequency
trading, which many manual traders perceive to have an unfair
technological advantage. Some blame 'algos' for contributing to
sudden crashes in financial markets and for creating a false
illusion of market liquidity by entering and withdrawing large
orders within milliseconds without necessarily intending to
trade on them.
Nowotny had earlier told reporters that putting the ECB in
charge of supervising banks in the euro zone was a good idea but
the central bank needed the right resources.
"As with any supervisory measure you have to watch out that
you actually have the means to fulfil the responsibility. That
is the discussion to be held now," he said.
Under a plan proposed by the European Commission on
Wednesday, the ECB would take over these responsibilities in
stages over a year from January.
However, the plan needs approval by all 27 European Union
states and the bloc's biggest economy, Germany, raised immediate
objections that the scheme would overload the ECB.
Nowotny said it was clear under the new proposal that
national and regional supervisors would de facto remain in
charge of supervising smaller lenders.
"I do not see national supervisors becoming superfluous," he
said, adding the European Banking Authority's ability to set
standards also remained intact.
Nowotny said he would welcome it if countries in central and
eastern Europe opted to join the system. "A unified (approach)
is an advantage especially for these countries that are so
closely interlinked with the rest of Europe," he said.
Some non-euro governments fear the new rules could weaken
(Reporting by Michael Shields; Editing by Ruth Pitchford)