Business

High-frequency traders face speed limit on deals

Computer cables
Image caption Trading firms plugged into the most advanced computers are the winners in HFT

High-frequency trading (HFT) in currencies could face "speed limits" in an attempt to create a fairer system.

HFT, where computer-driven deals are done in micro-seconds, has increasingly caught the attention of regulators.

Now a big player in the foreign exchange market, EBS, is to discuss with clients using its trading platform ways to slow things down.

EBS, part of UK-listed broker ICAP, said HFT gave an advantage to those investing in the fastest computers.

Next week, EBS will begin discussions with foreign exchange clients about speed limits. One idea is to end the "fastest wins" rule and instead batch together a series of currency orders, and then deal with them in a random order.

A spokeswoman for the firm told the BBC that "it's all about creating a fairer marketplace in which clients do business".

Some of the major concerns about HFT concern the equity markets, and EBS believes its attempts to limit speeds in the foreign exchange market will be followed closely.

The so-called "flash crash" of 2010, when the Dow Jones share index plunged 9% in minutes, only then to recover, focused regulators' attention on the consequences of HFT.

The EBS spokeswoman said the firm had already introduced measures to slow currency trading, such as limiting the string of decimal points used to make fractional differences in buy and sell orders.

EBS and Thomson Reuters run the two dominant electronic currency trading platforms in a market worth $4 trillion (£2.6tn) a day.

But Gil Mandelzis, EBS chief executive, told the Financial Times that the market was becoming a "technology arms race to the bottom... since people are having to make significant investments in speed without any connection to their trading strategy".

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