A worker holds splayed fibres of a fibre-optic cable used in the high-speed transmission of data.HANNIBAL HANSCHKE/Reuters
Canada's brokerage industry regulator is nearing the end of its high-frequency trading (HFT) study, assigning two research groups to measure the effect of these trades on the market.
The Investment Industry Regulatory Organization of Canada (IIROC) has assembled two groups of professors with international HFT experience to look into this hot topic. This move follows its 2012 report on the activity of traders, analyzing the activities of those who use technology to buy and sell shares in milliseconds.
The first research team will assess how HFT changes liquidity, risk management and the movement of information in order to understand whether the actions of HFT firms are beneficial. The second group will look at how market liquidity, stability and other factors are affected by HFT (and other market participant) short-selling.
"We believe it's important to address identified regulatory concerns relating to HFT using empirical data and objective study to better understand its impact on market integrity and quality, as well as overall investor confidence," said IIROC chief executive officer Susan Wolburgh, in a statement.
HFT has been a controversial issue of late, with Michael Lewis's book Flash Boys bringing the practice into the public consciousness. Discussions over forming a high-speed microwave network to allow faster connections between Toronto and the U.S. have also recently come to the fore.