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ECON evidence on High Frequency Trading and MiFID

Financial Markets

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5 December 2011

Finance Watch today gave evidence at a European Parliament hearing on the planned update to MiFID, the EU’s rules governing markets for financial instruments, and on high frequency trading.

The net price of transactions to investors has not fallen, because the fragmentation of equity trading venues has led to higher transaction prices that have not been compensated by lower transaction costs, Finance Watch Secretary General Thierry Philipponnat told the parliament’s ECON Committee.

“With the exception of market-making related activities and, possibly, arbitrage of price differences between different trading venues, all the other high frequency trading strategies have the mechanical effect of going against genuine investors’ ability to execute transactions at the best possible price for them,” Mr Philipponnat said.

In addition, the vast majority of OTC trades breach the spirit of MiFID rules on transparency, harming price formation and the economic usefulness of markets, Mr Philipponnat said.

Finance Watch will be publishing a detailed position on MiFID2/MiFIR in due course.

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