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Too Many Orders Clog Stock Exchange Systems

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High frequency trading is far from mainstream mode of operation still. Nevertherless, there seems to be a problem for stock exchanges to handle the order volume.

According to FT,  Deutsche Boerse plans to use “punitive charges” to discourage operators from entering excessively high number of orders in the system. Londong Stock Exchange, Borsa Italiana and Euronext have already introduced similar measures. This may work as a temporary measure, but they have to look for more efficient solutions as high frequency trading is on exponential rise and the trend is unlikely to change anytime soon. 

It is dubious to question the motives of the HFT firms for entering “excessive” amount of orders. This may happen from time to time, as a glitch in a system, but there is little or no incentive to do so on purpose and on regular basis. The bourses better adjust sooner than later as the excessive volume today will become norm tomorrow. And they should look for a more efficient way than “punitive charges” to handle this. 

And, of course, there is nothing to be done by regulators. This is technical and business matter and needs to be handled as such. If regulators get involved, Europe [again] will become less competitive place for trading business. 

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Written by A.S.

February 29, 2012 at 1:27 am

Posted in Uncategorized

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