German market puts brakes on high-frequency traders
Trading in German and French share options on the Deutsche Boerse’s Eurex platform will face a speed limit in a six-month test from June 3 (Daniel ROLAND)
Frankfurt am Main (AFP) – German stock market operator Deutsche Boerse plans to slow down some kinds of high-frequency trading by 1,000 times in a pilot project designed to reduce “aggressive” behaviour, it told AFP Tuesday.
Trading in German and French share options on its Eurex platform will face a speed limit in a six-month test from June 3, the group said.
Options give investors the right to buy or sell a set number of shares at a pre-fixed price and date.
The test will probe the effects of “parking” orders some traders place using high-powered computers with delays as low as one millionth of a second.
Such so-called “aggressive” orders are currently executed immediately on the stock market’s order book — the list of all the offers to buy or sell a financial instrument.
In future, they “will be ‘parked’ for one millisecond” or one-thousandth of a second, Deutsche Boerse said, adding the move would “enable market participants who provide liquidity to focus on the needs of final customers and institutional investors”.
One of Europe’s leading derivatives exchanges alongside London’s Liffe, Eurex says around one-third of its traders are high-frequency specialists, but that they account for 50 to 60 percent of options trades.
High-frequency trading has often under scrutiny as a potential amplifier of swings on financial markets.
“Some high frequency trading actors are especially active at times of high market volatility and can therefore contribute to strengthening trends in price development,” Germany’s Bundesbank central bank warned in a 2016 report.
But so-called “speed bumps” like Eurex’s “parking” rule have mostly been limited to American exchanges until recently.
Atlanta-based Intercontinental Exchange said in February that it would slap a three-millisecond delay on orders for gold and silver futures contracts.
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