The
segment of High Frequency Trading
is currently designated as the ultimate technology in systems investments, because of the ability to manage orders directly to book on a high speed.
There
is much
controversy regarding this technology,
either for lack of structure and procedures of software development,
causing risk of failure, or the misuse of some
participants due to the price manipulation
caused by these systems.
FCA, British authority, fined by the 1st time a case of market
abuse caused by the misuse
of high-frequency
systems, due to an abusive practice
that uses high speed
to send and cancel a high volume of orders
in the book, pressing prices artificially.
The FCA also
mentioned that he sent letters
requesting detailed testing
and supervision to 10 companies that have high frequency technology.
Other cases of
market manipulation have been observed, as reported by NANEX in
Nanex ~ Quote Spammer Spotted.
The ability to issue orders in a high speed has
its advantages, such as ability to
exploit arbitrage strategies. The American market, due to the high fragmentation, enables more
of this type of distortion and is
more flashy for
this type of investment.
These interventions, as well as the project for creating quality procedures for trading systems firms (www.at9000.org) started in the middle of last year, represent, on my point of view, significant advances for the global financial environment.
