High-frequency trading firms are hitting a growing number of “speed bumps” around the world—the latest blow to a business that has struggled in recent years.
Exchanges on both sides of the Atlantic are increasingly embracing the mechanisms, which impose a split-second delay before executing trades.
By 2020, more than a dozen markets in stocks, futures and currencies from Toronto to New York to Moscow will slow down trading via speed bumps or similar features, if all the current planned launches are carried out. Five years ago, only a few markets had speed bumps.
Supporters say speed bumps can help thwart ultrafast strategies that hurt investors. Critics—including many electronic trading firms—say they make markets unnecessarily complex and unfairly favor certain players.
By trying to blunt the impact of ultrafast trading, exchanges are defying high-speed trading giants that account for a huge portion of their volume, in a bid to appeal to more-traditional clients. Financial institutions such as banks and pension funds have long complained that high-frequency trading, or HFT, eats into their profits.
“It’s finally boiled to the point where the exchanges started paying attention to what their clients are saying,” said Roman Ginis, founder of IntelligentCross LLC, a startup U.S. stocks-trading platform.
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