SEC Chair Mary Jo White recently announced a broad program to get high frequency trading under control. Under the plan, entities that engaged in high frequency trading will have to register with the SEC.
The rationale for this new plan is to promote greater transparency in the markets. The SEC's agenda could ultimately impact the exchanges, brokerages and proprietary traders who have largely gone unregulated to date.
The SEC's plan dovetails that of the CFTC who has been said to be considering a similar high frequency program. By forcing these firms to register, there will be oversight.
With "transparency", the may be some limitation of the speed of trading, which may impact the advantages that proprietary traders have had. Although SEC Chair White stated that she was wary of setting "speed limits', such limits are bound to come.
Among the options being considered are frequent batch auctions or other devices that are designed to minimize speed advantages. The exchanges will also come under heightened scrutiny.
Despite these plans being in the formative stage, there will be a plan that will curtail high frequency trading to some extent. This form of trading will likely not go away, it will just look different going forward. How different, remains anyone's guess.
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