Lew Says Its Unclear If High-Frequency Trading Needs Regulation

(Bloomberg) — U.S. Treasury Secretary Jacob J. Lew said the government is trying to understand high-frequency trading in financial markets and indicated hes not sure yet whether it should be subject to stricter regulation.

I dont want to jump to a conclusion that there is a need for a regulatory response, Lew said today in response to a question at a conference in New York. We first have to understand whether there is a problem that traditionally rises to the level of regulatory concern.

Regulators are looking at two issues, Lew said: whether the financial system is designed to manage the transactional pace of high-frequency trading, and whether firms using the technique have any unfair advantages when connecting to exchanges.

Im not concluding that there is a problem in either area, Lew said. Generally, we dont regulate to drive investment decisions in a substantive way one way or the other.

The Securities and Exchange Commission has been studying the role of high-frequency traders for at least five years. SEC Chair Mary Jo White said in June that the agency would require high-speed proprietary traders who so far have escaped regulation to register as broker-dealers. The regulator also plans to develop a rule that will restrict short-term trading strategies that can disrupt markets and heighten volatility, she said.