[SIUYA]

FYI.....
Hedge Funds | HedgeWorld | The Definitive Hedge Fund Community

WASHINGTON (Reuters)—The fact that no one has comprehensively defined high-frequency trading has not stopped it from dominating debates over the fairness and stability of today's electronic marketplace.
Such computer-generated, rapid-fire trading has taken hold on exchanges globally, dominating volumes and making it faster, cheaper and easier to trade than ever before. Yet the strategies driving "HFT" and the unintended effects it has on securities prices are contentious and little understood, leading regulators to consider new rules to rein it in.

So this week, a U.S. Commodity Futures Trading Commission regulator pitched a seven-point definition meant to serve as a starting point for any new rules.

"Without a principled definition of what constitutes an HFT, any oversight scheme may inadvertently extend either too narrowly or too broadly unless the definition and behaviors are well understood," Scott O'Malia, a CFTC commissioner, said in a letter to an advisory committee on market technology.

Mr. O'Malia, who chairs the CFTC's Technology Advisory Committee, called his definition a "seven-part test for what constitutes an HFT," and asked the committee to consider it before a Dec. 13 meeting:

The use of extraordinarily high-speed order submission/cancellation/modification systems with speeds in excess of five milliseconds or generally very close to minimal latency of a trade.
The use of computer programs or algorithms for automated decision making where order initiation, generating, routing, and execution are determined by the system without human direction for each individual trade or order.
The use of co-location services, direct market access or individual data feeds offered by exchanges and others to minimize network and other types of latencies.
Very short time-frames for establishing and liquidating positions.
High daily portfolio turnover and/or a high order-to-trade ratio intraday.
The submission of numerous orders that are canceled immediately or within milliseconds after submission.
Ending the trading day in as close to a flat position as possible (not carrying significant, un-hedged positions overnight).
U.S. and European regulators have warned for at least two years that they could slap new restrictions on HFT hedge funds, banks and proprietary firms that send high order volumes and execute short-term trades, often to make markets.

The May 2010 "flash crash" amplified calls from some investors and politicians for a crackdown on HFT—though a regulator report later said such trading did not spark the crash, only that it exacerbated the speed and severity with which U.S. stocks plunged over the span of minutes.

In March, a CFTC subcommittee proposed new trading controls, such as kill switches, to reduce the risk of a runaway computer program roiling markets. Commissioner Bart Chilton has said he wants HFTs to register with the CFTC, something akin to the U.S. Securities and Exchange Commission's new reporting requirements for "large traders."

The European Union in October proposed new rules that would force high-frequency traders to buy and sell shares or other securities at around the price the market is trading.

By Jonathan Spicer

[Do Or Die]

High-Frequency Trading by Peter Gomber, Björn Arndt, Marco Lutat, Tim Uhle :: SSRN

The research at hand aims to provide up-to-date background information on HFT. This includes definitions, drivers, strategies, academic research and current regulatory discussions. It analyzes HFT and thus contributes to the ongoing discussions by evaluating certain proposed regulatory measures, trying to offer new perspectives and deliver solution proposals.

[SIUYA]

another article re trying to define HFT and the issues involved.
Scary if they start lumping HFT and algorithmic trading - even us fools know they are different.
a subset maybe - but different.

Europe

[SIUYA]

for those interested....
Automated traders must provide continuous liquidity - EC | The Trade News