SEC gaze turns to algos

Author: Edward Price | Published: 26 Feb 2016

The Securities and Exchange Commission will take a closer look at algorithmic trading this year, with the regulator reportedly considering a rule designed to improve regulatory oversight.

The rule will apparently be based on requiring enhanced record keeping on broker-dealers operating in algorithmic trading. While automated trading can broadly refer to trading that doesn’t require human intervention, algorithmic trading is more precise. Often, the term is used specifically for automated trading that uses multiple data sources in determining how and when to execute an order across multiple markets.

As such, algorithmic trading is a source of concern for regulators. Based on secret mathematical formulas, and speedy computerised decisions, it’s notoriously difficult to understand. Cracking it open will probably entail a closer look at proprietary data, which to the traders who own it is disquieting. 

But, if for no other reason than the market’s size, the imperative to...