Esma HFT proposals spark market backlash

Author: Gemma Varriale | Published: 11 Jun 2014

The European Securities and Markets Authority’s (Esma’s) proposals for defining high frequency trading have prompted concern among industry participants.

The proposals come as part of the Paris-based securities watchdog’s wide-ranging consultation on the implementation of MiFID II.

The consultation is the first step in the process of translating requirements of the Markets in Financial Instruments Directive (MiFID II) and its corresponding regulation (MiFIR) into practical rules to address the effects of the financial crisis.

Under Esma’s first approach to defining high-frequency trading (HFT), every firm using co-location techniques and high bandwidth to achieve faster messaging or executions, with high-message intraday rates, defined as a trading frequency of two messages per second, would be recognised as a HFT firm.

"The fact that Esma will consider a trader to be a high-frequency trader if they generate two or more messages per second is arbitrary and could be problematic,"...