While high-frequency trading is not likely to fade away, or even diminish, in the next few years, a drive by global regulators for greater transparency and additional revenue has the potential to make a dramatic impact on trading practices and business models, industry analysts say.
In the US, a proposal by the Commodity Futures Trading Commission to require the registration of high-frequency firms and pre-test their algorithms is in the spotlight.
While in Europe, the focus is on an EU update of its Markets in Financial Instruments Directive (MiFID) and a possible European transaction tax on trades that is expected to make life costly for high-frequency traders.
"It's a fool's game to predict when or if the European Commission will approve and implement a transaction tax," said Will Rhode, a senior analyst at TABB Group in London. But the idea is not going away, and has “got a real head...