NEW YORK, Oct 30 (Reuters) - The head of the New York Stock Exchange operator does not expect U.S. regulators to significantly stifle high-frequency trading and doubts a new transaction tax will be enacted, he said on Friday.
The U.S. Securities and Exchange Commission, under pressure from some politicians and investors, is looking into the ultra-fast trading technique in which banks, hedge funds and proprietary shops use sophisticated algorithms to earn profits from market imbalances and tiny spreads.
“Our guess is they might ask for some reporting around it or something like that but I don’t think we’re going to see any major initiatives that are going to stifle high-frequency market making,” NYSE Euronext NYX.NNYX.PA Chief Executive Duncan Niederauer said on a conference call.
SEC Chairman Mary Schapiro said this week that there was “a lot of concern” about high-frequency trading. The regulator plans to issue a discussion paper on the issue early next year and proposals by the middle of 2010.
High-frequency traders are the effective new market makers for U.S. stocks, having replaced floor specialists and slower trading firms. They account for an estimated 60 percent of all volume.
Critics say the phenomenon creates a marketplace that harms smaller or long-term investors, although that claim is difficult to prove. An extreme solution floated in Washington is a new tax on trading.
“If a ... transaction tax in the regulated markets got any kind of traction, which we’re told it’s not going to, I think that would certainly put a damper on volumes in all venues,” Niederauer said on the quarterly call with analysts.
NYSE Euronext wants “nothing too dramatic,” he said, “but we would like to see a leveling of the playing field” following the overarching regulatory review of the cash equity marketplace, including the anonymous venues known as dark pools.
“It’s hard for me to imagine that the regulatory landscape ... in the U.S. could get a lot worse for us,” he added. (Reporting by Jonathan Spicer; Editing by Lisa Von Ahn)