ECB calls for light touch on high frequency trading

Frankfurt

THE European Central Bank called for a gradual approach to regulating ultra-fast trading on Tuesday, fearing stringent rules on the practice might jeopardise financial markets.

High-frequency trading (HFT), which uses super-fast computers and connections to place trades, has been blamed for accentuating market swings and penalising other investors by flooding trading venues with orders that immediately get cancelled or go unfilled.

The ECB, which advises European Union institutions on financial issues, said tightening rules too far may squeeze market liquidity, reducing the ease of buying and selling financial assets at a stable price. "Our results would support a gradual implementation of high-frequency regulation," the ECB said in a bulletin on Tuesday. "More constraining measures... seem, in light of our study, not yet necessary and should be used with care as their negative impact on market liquidity, efficiency and resilience might be d…