European plans to restrict high-frequency trading (HFT) – the computer-driven, millisecond dealing in shares – should be resisted, according to a UK government-sponsored report.
Sir John Beddington, the chief scientific adviser to the Government, who led the investigation, said that while there was probably a need for greater regulation over high-frequency trading, only two of the EU's nine suggestions would be effective.
The report found no direct evidence that HFT, on which Robert Harris, pictured, based his bestseller The Fear Index, increased volatility, nor signs that it has led to an increase in market abuse.
But it also noted that HFT may have only "modestly improved the functioning of markets in some respects" and had some "possible effects on instability in financial markets". Such computer-based systems account for 30 per cent of equity trading in the UK and possibly as much as 60 per cent in the US.
Christian Voigt, at the trading-technology group Fidessa, said: "HFT firms have been widely vilified in recent months, though the reasons most typically given are, in fact, based on popular misconceptions."
Joe Saluzzi, from Themis Trading in New Jersey, told Radio 4's Today programme that the problem with the computer systems is that "they don't care".
"There is no investment banking, no research, no sales and trading; they are just there to make money," he said. "That is why the structure of the market has changed so much… and it's not a good thing."