James Moore: Barnier’s EU crackdown on HFTs won’t take effect for years – if ever

 

Now Michael Lewis has written about high-frequency trading in Flash Boys it has become big news.

A debate about the practice has been rumbling on for some time but it has largely been conducted in the arid terrain of trade publications and the financial blogosphere.

Mr Lewis’s involvement means it has been brought into full public view. So another Michael has decided he wants a piece of the action. Well, a Michel.

That Michel is Michel Barnier, the EU’s internal market chief who’s been a busy boy of late. Just last week he unveiled plans to force the rest of Europe to take up Vince Cable’s governance reforms that give shareholders a binding vote on executive pay policy at the companies they own (with the addition of a couple of extras that were too rich even for Vince’s blood).

He’s promising to lead the toughest-ever clampdown on “flash boy” high-frequency traders (HFTs).

Actually most of them aren’t very flash. They’re more often geeky types who are whizzes with numbers but don’t get out as often as they should. The “flash” refers to the trades their algorithms execute. Gazillions of them can be pushed through in infinitesimally short periods of time. It’s an activity that has become very profitable.

Mr Barnier worries that these trades may be a cause of instability, such as in 2010 when the US Dow Jones Industrial Average briefly lurched down by almost 1,000 points. So he’s going to force them to submit to regulation.

The rules he’s proposing will make the lives of HFTs, and the exchanges which make millions in fees from them, more difficult. But he has stopped short of proposing requirements for what is known as a “minimum resting period”. That would force share orders to remain on the books for a minimum time, stopping HFTs in  their tracks.

Mr Barnier has said that while he wants to keep a closer eye on HFTs, they “may be  of benefit”.

If so, it’s hard to see how.

The traders’ lobby likes to deploy a trope that has long been a favourite of the hedge-fund industry. It holds that HFTs are ultimately useful because they “provide liquidity”. In English that means they help to ensure there are always enough buyers and sellers of shares around in the market, something you need to keep the show on the road. This (their proponents argue) also helps keeps the “spread” between buying and selling prices low.

Au contraire, say critics. It’s not liquidity these people are providing so much as volume. Thanks to sophisticated technology they shove a huge amount of trades through in short periods of time, managing to make a virtually guaranteed profit.

Do that, and someone has to lose out, because these traders are providing a service to no one other than themselves and the exchanges they trade over. That someone is us. Anyone who has a pension, Isa, unit trust, investment trust and so on.

Unfortunately even the rules that have been proposed are unlikely to take effect for three to four years. So there will be ample time for lobbying to water them down when the spotlight has faded and Lewis’s book is on the two for a fiver table at Waterstones.

Unless, that is, someone can find a way of making a movie about this somewhat rarefied subject. Over to you Mr Lewis. You may do more for our pensions than  Mr Barnier ever will. 

PROMOTED VIDEO
Arts and Entertainment
Robert De Niro, Martin Scorsese and DiCaprio, at an awards show in 2010
filmsDe Niro, DiCaprio and Pitt to star
News
i100
News
In this photo illustration a school student eats a hamburger as part of his lunch which was brought from a fast food shop near his school, on October 5, 2005 in London, England. The British government has announced plans to remove junk food from school lunches. From September 2006, food that is high in fat, sugar or salt will be banned from meals and removed from vending machines in schools across England. The move comes in response to a campaign by celebrity TV chef Jamie Oliver to improve school meals.
science
Sport
England captain Wayne Rooney during training
FOOTBALLNew captain vows side will deliver against Norway for small crowd
Life and Style
Red or dead: An actor portrays Hungarian countess Elizabeth Báthory, rumoured to have bathed in blood to keep youthful
health
News
peopleJustin Bieber charged with assault and dangerous driving after crashing quad bike into a minivan
News
ebooksAn unforgettable anthology of contemporary reportage
News
peopleHis band Survivor was due to resume touring this month
News
people'It can last and it's terrifying'
Life and Style
fashionModel of the moment shoots for first time with catwalk veteran
Sport
Radamel Falcao poses with his United shirt
FOOTBALLRadamel Falcao's journey from teenage debutant in Colombia to Manchester United's star signing
Life and Style
fashionAngelina Jolie's wedding dressed revealed
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Front-Office Developer (C#, .NET, Java,Artificial Intelligence)

£30000 - £45000 per annum + benefits+bonus+package: Harrington Starr: Front-Of...

C++ Quant Developer

£700 per day: Harrington Starr: Quantitative Developer C++, Python, STL, R, PD...

Java/Calypso Developer

£700 per day: Harrington Starr: Java/Calypso Developer Java, Calypso, J2EE, J...

SQL Developer

£500 per day: Harrington Starr: SQL Developer SQL, C#, Stored Procedures, MDX...

Day In a Page

Chief inspector of GPs: ‘Most doctors don’t really know what bad practice can be like for patients’

Steve Field: ‘Most doctors don’t really know what bad practice can be like for patients’

The man charged with inspecting doctors explains why he may not be welcome in every surgery
Stolen youth: Younger blood can reverse many of the effects of ageing

Stolen youth

Younger blood can reverse many of the effects of ageing
Bob Willoughby: Hollywood's first behind the scenes photographer

Bob Willoughby: The reel deal

He was the photographer who brought documentary photojournalism to Hollywood, changing the way film stars would be portrayed for ever
Hollywood heavyweights produce world's most expensive corporate video - for Macau casino

Hollywood heavyweights produce world's most expensive corporate video - for Macau casino

Scorsese in the director's chair with De Niro, DiCaprio and Pitt to star
Angelina Jolie's wedding dress: made by Versace, designed by her children

Made by Versace, designed by her children

Angelina Jolie's wedding dressed revealed
Anyone for pulled chicken?

Pulling chicks

Pulled pork has gone from being a US barbecue secret to a regular on supermarket shelves. Now KFC is trying to tempt us with a chicken version
9 best steam generator irons

9 best steam generator irons

To get through your ironing as swiftly as possible, invest in one of these efficient gadgets
England v Norway: Wayne Rooney admits England must ‘put on a show’ to regain faith

Rooney admits England must ‘put on a show’ to regain faith

New captain vows side will deliver for small Wembley crowd
‘We knew he was something special:’ Radamel Falcao's journey from teenage debutant to Manchester United's star signing

‘We knew he was something special’

Radamel Falcao's journey from teenage debutant to Manchester United's star signing
'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

'I’ll tell you what I would not serve - lamb and potatoes'

US ambassador hits out at stodgy British food
Radio Times female powerlist: A 'revolution' in TV gender roles

A 'revolution' in TV gender roles

Inside the Radio Times female powerlist
Endgame: James Frey's literary treasure hunt

James Frey's literary treasure hunt

Riddling trilogy could net you $3m
Fitbit: Because the tingle feels so good

Fitbit: Because the tingle feels so good

What David Sedaris learnt about the world from his fitness tracker
Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Second-holiest site in Islam attracts millions of pilgrims each year
Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York