Regulating High-frequency Trading: An Examination of European, US and Australian Equity Market Structures

Equity trading in the world is dramatically changing and at the same time raising doubts as to both its quality (liquidity, price efficiency and volatility) and its integrity; the change is mainly due to two factors: the first is fiercer competition, both among trading venues and between trading venues and intermediaries; the second is the increasingly significant role of technology in trading processes. Fiercer competition has primarily been the result of regulation. The second factor, technology, is significant in so far as the algorithms used by some traders have changed the operating procedures underlying the execution of orders. While advances in technology are a natural evolution of the market, they have a major impact on market structures. In particular, in the event of network outages or flash crashes, doubts arise in relation to the market integrity and the existence of a level playing field, since technology is expensive and not equally accessible to all traders.