| NEW YORK, March 27
NEW YORK, March 27 U.S. regulators are unlikely
to put rules in place that would harm high-frequency trading
(HFT) as doing so would make trading more difficult and
expensive for all investors, Robert Greifeld, chief executive
officer of Nasdaq OMX Group said on Thursday.
HFT is a practice carried out by many hedge funds, banks and
proprietary firms using sophisticated computer programs to send
high volumes of orders at near light speed, executing short-term
trades to make markets or capitalize on price imbalances. HFT
makes up more than half of all U.S. trading volume.
Last week, New York state's Attorney General Eric
Schneiderman said in a speech that U.S. stock exchanges and
alternative trading platforms provide HFT firms with unfair
technological advantages that give them early access to key
Shares of Nasdaq, the third-largest U.S. stock exchange
operator by volume, fell as much as 4 percent during on the day
of Schneiderman's speech, its biggest single-day drop since
HFT firms pay to locate their computer servers within the
data centers of exchanges, and for extra network bandwidth and
high-speed switches that give them pricing, volume and order
information ahead of others as they race to take the other side
of profitable trades, which they then quickly trade out of.
Proponents of HFT argue that the practice has led to a more
efficient market and ultimately, a reduction in bid-ask spreads,
benefiting all investors.
A ban on HFT would be unlikely, as that would make it harder
for investors to get their trades filled, and it would lead to
wider bid-ask spreads, Greifeld told analysts and investors
during a presentation in New York on Thursday.
"People are going to be very hesitant to put in policies
that remove liquidity from the market. You could argue whether
the liquidity is always there when you want it, but there is
still liquidity in the marketplace," he said.
HFT critics say the liquidity provided by these firms is
fleeting and that in times of stress, when the liquidity is
needed most, many HFT firms pull back from the market.
In May 2010, the market plunged nearly 700 points in a
matter of minutes before sharply rebounding, shaking the
confidence of investors in the soundness of the market. A
regulatory report found that HFT was not responsible for causing
the so-called flash-crash, but that the problem was exasperated
as HFT firms quickly exited the market.
If curbs were placed on HFT, the wider spreads would present
other opportunities that would be "fundamentally advantageous"
for Nasdaq, Greifeld said, in response to one of three questions
from analysts on the possible impacts of any new HFT
"The point is, I don't see anything happening in the near
term and I think when the regulators and the people who know the
markets and have the economic data in front of them, they are
going to be loath to take liquidity away from the market. I have
yet to see that happen in any regulatory structure around the
planet," Greifeld said.
(Reporting by John McCrank; Editing by Lisa Shumaker)