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Tim Quast
Traders Magazine Online News

We're All HFTs Now

In this guest commentary, author Tim Quast looks back at the history of HFT and how the market has evolved to where many firms now fit the definition of high-frequency trader.

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September 30, 1999

Financial Deregulation Tops Traders' Agenda

By William Hoffman

The major piece of legislation of general interest to securities traders, S. 900, the Financial Services Modernization Act, is in conference committee. Representatives of both houses are trying to reconcile their different approaches to the deregulation measures championed by Sen. Phil Gramm (R-Texas), chairman of the Senate Finance Committee.

Among many other provisions, the bill would subject banks and bank holding companies to some of the same regulations and registration requirements as brokers and dealers. Banks, in exchange for accepting these regulations, would have more freedom to compete in the financial services industry. President Clinton's plans for the bill are unclear, Washington observers said.

More Business

Traders should look forward to S. 900 becoming law, said Alan Bromberg, professor of corporate and securities law at Southern Methodist University in Dallas. "I think [traders are] going to get more business. The bill will let them," said Bromberg, who helped write the Texas Securities Act.

But it is the securities industry, not the federal government, that traders and their colleagues should first look to for signs of change in their business, observers said.

"There's any number of initiatives that the [National Association of Securities Dealers] has out that are going to directly affect the trading community," said John E. Pinto, executive vice president at DOVER International, a securities compliance and financial services consultancy that monitors developments in Congress.

Continued proliferation and growth of electronic communications networks, and their potential mutation into full-fledged self-regulatory exchanges; initial public offerings at Nasdaq and the New York Stock Exchange; the move to decimalization; and resurrection of the central limit order book proposal, are likely to have a more immediate and profound effect on traders than any legislation pending in Congress, Pinto and Bromberg said.

Star Legislation

Traders are advised to keep an eye on state legislatures and regulators as well.

"States tend to be more alert, agitated and activist, and attract more attention in Congress," Bromberg said. He noted that state legislatures haven't been particularly successful at influencing Congress to consider the concerns raised by state regulatory agencies.

Lately, these concerns include day trading activities. But state legislatures have repeatedly persuaded Congress to remove language from federal legislation that could interfere with the prerogatives of state regulators, Bromberg added.