Global regulators on Thursday came up with a plan for securities watchdogs to monitor high-frequency trading, but fell short of draconian measures.
The International Organization of Securities Commission is made up of regulators - such as the U.S. Securities and Exchange Commission and Britain's Financial Services Authority - from about 100 countries.
Among IOSCO's top recommendations: that regulators ensure operators of trading venues have in place "suitable trading control mechanisms" such as trading halts to deal with volatile market conditions. Regulators must also ensure that members of trading platforms and their clients follow "pre-trade controls." Those recommendations have already been put into play by many national regulators.
The Flash Crash on Wall Street in May 2010 caused regulators to investigate high-frequency trading and the algorithms they use. High-frequency trading accounted for 56% of U.S. and 36% of European equity volume last year, according to research firm Tabb Group.
IOSCO says there was little evidence that high-frequency trading cause insufficient price discovery or led to widespread market abuses so there was little need for cumbersome regulations. It will issue a final study on the practice in 2012.
