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June 1, 2010

HFT Is A-OK, Industry Says

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  • HFT Is A-OK, Industry Says

In its Concept Release, dated Jan. 13, the Securities and Exchange Commission asked the industry and the general public for their views on the activities of high-frequency traders. The commission wondered whether HFT practices might be bad for the marketplace and require regulation.

Most respondents--but not all--said "no."

 

 

There is a market misperception that this investor type is predatory, and operates by manipulating the markets or by seeking to game other orders. We believe this is a sweeping mischaracterization of the vast majority of short-term traders.

--John Ingrilli, chief operating officer, UBS Equities, Americas

 

 

The liquidity they provide is beneficial to the markets.

--David Cushing, director of global equity trading, Wellington Management Company

 

 

As high-frequency traders have hijacked the equity markets and become the casino (i.e., "the house"), they have become nearly impossible for long-term investors to avoid. Investors must either engage HFTs and pay a "tax" or risk never allocating their capital to worthy enterprises.

--Deborah Craddock, head of trading, et al., Southeastern Asset Management

 

 

Each participant should be judged on their behavior, not their business model.

--Peter Kovac, chief operating officer, EWT LLC

 

 

High-frequency trading is the first to flee the market in times of stress and volatility. They can simply turn their programs off for the rest of the day. [NYSE]-designated market makers have an obligation to the marketplace and do not stop trading just because it enters a short period of unprofitability.

--Patrick Armstrong and Daniel Tandy, co-presidents, Alliance of Floor Brokers

 

 

HFTs are the liquidity backbone of the market.

--Manoj Narang, chief executive, Tradeworx

 

 

Legitimate conduct should not suffer disparate regulatory treatment based on whether such conduct is "high-frequency" or "low-frequency."

--Eric Hess, general counsel, Direct Edge Holdings

 

 

Speed is not inherently unfair or harmful; it is the misuse or misapplication of speed that may harm investors or markets.

--Joan Conley, corporate secretary, Nasdaq OMX Group

 

 

The term "high-frequency trading" is ill-defined, referring to a broad range of strategies and activities. Thus, the commission should avoid generalizing the concerns raised by certain questionable strategies to all electronic traders.

--John McCarthy, general counsel, GETCO

 

 

High-frequency traders and their strategies are under scrutiny for the very benefits to which they have directly contributed-the ability to recognize immediate price discrepancies and equalize pricing of securities.

--Greg O'Connor, compliance manager, Wolverine Trading

 

 

If long-term investors are the gasoline that fuels the U.S. market's economic engine, then short-term investors are the oil that ensures the engine runs smoothly and efficiently.

--John Ingrilli, chief operating officer, UBS Equities, Americas

 

 

HFT is a type of trading, not a type of trader. Any regulatory initiatives designed to address issues raised by HFT should be targeted to the type of activity, rather than the market participant.

--Ann Vlcek, associate general counsel, SIFMA

 

 

This increase in the volume of placed, canceled and replaced orders is a sign of a competitive, well-functioning, highly efficient electronic market with tight bid-ask spreads. This activity is not an indication of market abuse. Market makers have always canceled and refreshed their quotes in response to market movements.