Over the past 10 years, trading in the U.S. securities markets has dramatically changed from primarily manual trading to almost predominately computer-based trading. New regulations – such as Regulation ATS, decimalization requirements and Regulation NMS – fostered comprehensive computer linkages among trading venues and concomitant upgrades to market participants’ trading systems. Technological advances – such as high speed computing and co-located servers, increased bandwidth, and electronic messaging standards – have accelerated the adoption of new electronic trading strategies, tools, and behavior.
Recent concerns raised in connection with the operation of today’s markets have been focused on computer-based trading activities and strategies that generically have been referred to as “high-frequency trading” (HFT). SIFMA shares its views on computer-based trading, including HFT. Among other points in this paper, SIFMA seeks to describe the benefits electronic markets and computer-based trading provide to investors, and also specific activities and behaviors that may warrant additional regulatory consideration.