Given that the new Chair of the House Financial Services Committee, Rep. Jeb Hensarling (R-TX) is a longtime leader on the issue of high frequency trading, it is highly likely that the Committee will pursue this issue with hearings and other activities in 2013. In earlier remarks, Rep. Hensarling has noted that a shoot the computers first and ask questions later approach will not restore investor confidence or promote capital formation.
Chairman Hensarling believes that
the high frequency trading debate is not a debate about who has access to what
technology. Rather, it is a debate about the health, efficiency, and
competitiveness of the financial markets. Any action taken by Congress or the
SEC should be based on economic and empirical data, not political pressure.
In 2010, then Senator Edward Kaufman
(D-DE) informed the high frequency trading debate with some specific proposalssubmitted to the SEC. The Senator said that high frequency traders who exceed a
certain volume threshold should be required to register with the SEC, and then
subjected to automatic risk compliance and anti-gaming checks. He also urged the
SEC to impose some liquidity provision obligations on high frequency traders.
Enhanced requirements should be crafted to encourage high frequency traders to
post two-sided markets and supply investors with a consistent source of deep liquidity.
In addition to affirmative liquidity provision obligations, the Commission
should consider instituting negative obligations as well.