Research commissioned by the Investment Industry Regulatory Organization of Canada (IIROC) suggests that there is no need for more High Frequency Trading (HFT) regulations.
In a study released on Dec. 9, IIROC says academic research into the subject "did not reveal any concerns that warranted a regulatory response beyond measures already implemented".
In fact, the study suggests that HFT has a positive effect on Canadian equity markets and investors. The research indicates that HFTs tend to provide more liquidity, contribute substantially to price discovery, and that most passive orders entered by HFT either improve the best price or match the prevailing best prices. In addition, the study found little evidence that high-frequency trades take advantage of slower or front-run non-HFTs
“Our HFT research demonstrates how IIROC uses empirical information and objective analysis to inform policy development,” comments Victoria Pinnington, senior vice-president of market regulation at IIROC. “As a public interest regulator, it was important to conduct comprehensive research to help us all better understand HFT and its effects on Canadian market.”