Friday, May 24, 2013

U.S. and Global Hedge Fund Groups Seek Guidance on German High Frequency Trading Legislation

In a letter to the German Federal Financial Supervisory Authority (BaFin), U.S. and global hedge fund associations asked the regulator to issue guidance under the High Frequency Trading Act to clarify that where an investment management firm trades on a German organized market or multi-lateral trading facility on behalf of funds that it manages, neither the investment management firm nor the funds on whose behalf it trades are dealing for their own account, meaning that they are therefore not subject to the definition of the Act and the associated licensing regime.

In their joint letter, the U.S. Managed Funds Association and the London-based Alternative Investment Funds Association explained that an investment manager, a distinct legal entity, is a fiduciary responsible for implementing a hedge fund’s investment strategy and trading securities on a fund’s behalf. The investment manager trades securities as a customer of an intermediary; accordingly, the investment manager is the indirect member of a trading venue.