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High Frequency Trading: Is Regulation the Answer?

April 19, 2017

High Frequency Trading or HFT is one of those things that folks either love or hate. For detractors, it is a predatory trading tactic/strategy that has ruined the markets; for supporters, it's a legitimate trading tactic/strategy that is simply another step on the road to digitalizing Wall Street. Depending on your perspective, HFT is an oncoming Tsunami that will leave only devastation in its wake; or, in the alternative, it is merely the passing fad and fancy of the day's trading gurus. You are free to see HFT as you will. I have no interest in advocating for either side of the proposition. That being said, I recently came upon a very thoughtful analysis of how best to regulate (or not) HFT: ""High Frequency Trading: Is Regulation the Answer?" (Wake Forest Journal of Business and Intellectual Property Law, Volume 17, Number 2, Winter 2017 by Lazaro I. Vazquez).

Vazquez, an Associate in the Corporate Practice Group of the law firm of Shutts & Bowen, offers a nuanced narrative about the moving target that HFT presents for regulators.  There is much merit to his position and, if nothing else, he should engender debate. The author concludes that:

Rather than pass new regulations targeting HFT like other countries have done, U.S. regulators should focus on spotting when deceptive or manipulative practices are taking place and apply the general securities regulations currently in force to charge violators. . . Nonetheless, one thing is clear, more regulations are not the answer to deceptive and manipulative practices, and instead oversight and case law development is the proper course of action.

Page 176 of the article

READ: "High Frequency Trading: Is Regulation the Answer?" (Wake Forest Journal of Business and Intellectual Property Law, Volume 17, Number 2, Winter 2017 by Lazaro I. Vazquez) 

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