A report in the Australian Financial Review says the corporate regulator may introduce “clamps” on high-frequency traders, following the release of Michael Lewis’ new book Flash Boys, which says US markets are rigged due to the prevalence of super fast, computer-powered investors.
The suggestion is from a submission to the financial services inquiry, and is based on IEX, an exchange held up in Lewis’ book as the only fair one in the United States.
“If people can’t have trust and confidence in the market, then you don’t have a market,” ASIC chairman Greg Medcraft told AFR.
“The strength of the market is reflected in how many retail investors you have. If you discourage real buyers, then markets become trading for trading’s sake, rather than serving the real economy.”
The clamps would force HFTs to wait half a second before making trades, which could be significant given these investors are relying on thousands of simultaneous split-second, computer-generated advantages.
Lewis’ new book says HFTs in the US can essentially use the myriad, split second information generated by their trades to predict the investment of slower players in the market, and buy or sell on this information. He described it as “legal front running.”
There’s more here.