The House of Lords Economic Affairs Committee has published a letter it sent to Martin Wheatley, FCA Chief Executive, on the subject of high-frequency trading (HFT).

The letter outlines the comments of Mr Brad Katsuyama, President and Chief Executive of IEX (the US equity trading venue) given during a one-off evidence session on 22 July 2014. Mr Katsuyama discussed his experiences of the US equity markets, particularly opportunities that HFT has created for predatory practice.

The committee notes the revisions being introduced by the Markets in Financial Instruments Directive (MiFID) in two years’ time. Although Martin Wheatley observed these changes represent a long and complex list of new rules, these changes have been met with the contrasting view of Mr Katsuyama who felt that it would be difficult for direct regulatory action to prevent predatory trading or market volatility and he advocated instead more transparency and disclosure for trading venues.

The committee asks Mr Wheatley whether he believes that predatory trading is an issue in the UK equity market and, if so, how the FCA thinks the issue should be addressed. Mr Wheatley is also asked to comment on Mr Katsuyama’s comments as outlined in the letter.

View House of Lords letter to Martin Wheatley on regulation of high-frequency trading, 31 July 2014