BERLIN Jan 28 German lawmakers have delayed
making a decision on changes to a draft law to clamp down on
high-frequency trading in shares and other financial instruments
due to the issue's complexity, a source from Chancellor Angela
Merkel's party said on Monday.
"We still need to clarify lots of technical details," the
source said. "That is why we need to have a second meeting."
Merkel's centre-right coalition had been expected to decide
on changes on Monday, but the source said a decision would
probably not now be reached until the end of the week.
High-frequency traders use computer algorithms to generate
numerous, lightning-speed automatic trades that make money from
tiny price moves in the market. Holding investments for short
periods only, they have been accused of increasing market
volatility and increasing the risk of a market meltdown.
But such trading is a major source of income for financial
market operators, with Deutsche Boerse saying around
40 percent of the trading volumes on its share trading platform
Xetra and on its options and futures exchange Eurex now come
from high frequency trading.
Turnover at Eurex last year fell 18 percent to 2.3 billion
contracts while Deutsche Boerse said the value of shares traded
on its Xetra market fell 23 percent to 1.16 trillion euros
Under its proposals the German government wants
high-frequency traders to register with market regulators and
disclose their secretive trading algorithms.
It also wants to limit the number of decimal points given in
market prices and prevent traders from requesting pricing
information without intending to trade.
Germany's move to tighten its own market regulations comes
as European Union member states are also discussing the rules
governing high-frequency trading as part of a reform of the
Markets in Financial Instruments Directive (MiFID).
An EU-wide reform is not expected to come into force until
at least 2015 and Deutsche Boerse has previously
criticised its government for not waiting, for fear that a
unilateral approach would lose it business.
Once Germany's coalition has agreed on amendments to the
draft law with the Bundestag lower house of parliament's finance
committee it will need to be approved by the German parliament.
This approval should be granted as the ruling coalition holds a
majority in both the committee and the parliament.