Germany’s ruling coalition has agreed on a set of principle that will allow Bafin, the country’s regulatory authority, to oversee high-frequency trading (HFT).
The proposed regulations seek to ban high-frequency traders from using strategies such as “fleeting orders,” where traders place a large number of orders without executing them in order to influence prices. Fines will also be levied for excessive use of trading systems, and a threshold will be set for minimum price movements.
High frequency trading is estimated to account for 40% of trading volume in Germany, where exchanges have already been moving towards preventing abuse of HFT. Since March, Deutsche Boerse has imposed extra fees on customers with unusually high order-to-trade ratios.
The German cabinet is expected to consider the draft law later this year.