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
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,"...