Half of head equity traders at U.S. money management firms believe high-frequency trading is the most important issue facing market regulators, a survey by research firm TABB Group shows.
Traders following “long-only” strategies, or bets that stocks will rise, plan to step up their monitoring of orders, tighten controls and evaluate transaction costs more closely as a result, according to the study.
The SEC is examining potential new restrictions to high-frequency computerized trading after the May 6 crash that temporarily wiped out $862 billion of stock market value in less than 20 minutes. The Financial Industry Regulatory Authority, which oversees brokers and their firms, is investigating manipulative activity that may rely on automated trading strategies.
Asset managers have responded to high-speed automated traders with their own computer programs that in some cases seek to disguise large buy and sell orders. Thirty percent of shares traded by money managers are done through a broker algorithm, TABB estimated.
Trading is becoming more concentrated in the biggest firms, according to Tabb. The 12 largest brokers are expected to execute 71% of share volume in 2011, according to the study.
TABB interviewed 68 head traders at U.S. institutional equity firms managing a combined $12.9 trillion.
