The segment of High Frequency Tradingis currently designated as the ultimate technology in systems investments, because of the ability to manage orders directly to book on a high speed.There is much controversy regarding this technology,either for lack of structure and procedures of software development, causing risk of failure, or the misuse of some participants due to the price manipulationcaused by these systems.
FCA, British authority, fined by the 1st time a case of market abuse caused by the misuseof high-frequency systems, due to an abusive practicethat uses high speed to send and cancel a high volume of orders in the book, pressing prices artificially.
See U.S. and UK fine high-speed trader for manipulation. The FCA also mentioned that he sent letters requesting detailed testingand supervision to 10 companies that have high frequency technology.
Other cases of market manipulation have been observed, as reported by NANEX inNanex ~ Quote Spammer Spotted.
The ability to issue orders in a high speed hasits advantages, such as ability to exploit arbitrage strategies. The American market, due to the high fragmentation, enables more of this type of distortion and ismore flashy for this type of investment.
These interventions, as well as the project for creating quality procedures fortrading systems firms (www.at9000.org) startedin the middle of last year, represent, on my point of view, significant advances for the global financial environment.
