EU Joins Team US Regulators In 'We Have No Idea What High Frequency Trading Is But We'll Just Regulate The Hell Out Of It Anyway' Game

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The EU is hopping on the let's get after the-high-frequency-trading bandwagon and has started to investigate the practice. Bloomberg reports that the European commission met with industry representatives in Brussels on Jan. 11 and that the talks are part of an information-gathering exercise. In the US, the practice, which accounts for 50% to 60% of equity market trading volumes, has been under fire in the past months as regulators are calling for more stringent oversight.


The Securities and Exchange Commission has made several proposals, including a ban on flash-orders and a more severe regulation of dark pools.
High-freq aficionados say the practice adds liquidity to the markets and doesn't prey on traditional stock investors- an argument at the crux of the controversy.
A Greenwich Associates survey, which polled 78 institutional investors, including banks, hedge funds, investment managers, mutual funds, pension funds and insurance companies, in the US, Europe and Canada, shows that 57% of the institutions would support regulation and 21% would support a ban on high-frequency trading.
But what's most interesting is that it also points to the institutions' lack of consensus about the practice's role in equity markets and whether it actually helps or hurts they own trading operations and outcomes.
I don't remember where I read the following quote but it seems to apply here: "In the dark, the stone becomes a buffalo." Trying to prevent a new derivatives/securitization debacle seems fair enough, but a bit of additional understanding, research and data might come in handy before going out all crazy.

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