"SEC eyes IDs for High Frequency Traders"

File this under "Why hasn't this been done yet?"

Is the SEC qualified to analyze this data? (Funding the SEC and the failure to identify and penalize wrongdoing has been noted recently.)

The mountain of data will likely hide any manipulation.
The fact that 60% of future volume could originates from HFT 'inside the spread' trading should be worry enough. The traditional supply demand equation now has an artificial inside force generating pseudo-liquidity and false presence of investor supply/demand.

Making volume readings artificially inflated will have a direct impact on market strategies relying on more traditional views of supply/demand and volume.

Tagging the HFT trades should expose the real supply/demand or lack thereof underneath.

--Mike

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Originally published on http://www.hedgeworld.com/
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SEC eyes IDs for High Frequency Traders

By Reuters
Wednesday, April 07, 2010

WASHINGTON (Reuters) U.S. securities regulators are considering a plan that would require high frequency traders to reveal who they are and disclose their trades to the Securities and Exchange Commission, the agency said on its web site on Wednesday [April 7].


The SEC can force large, non-broker firms such as proprietary traders and hedge funds to use an ID number when trading, giving the regulator information about their executions and their effect on the wider market.


The proposal, to be considered at an April 14 meeting, comes as the SEC examines whether additional rules are needed to curb fast traders, or firms that use sophisticated algorithms to buy and sell stock in a fraction of a second.


The rapid trading is estimated to account for some 60% of all U.S. equity trading and has been scrutinized by some U.S. lawmakers.


"I applaud the SEC for moving forward with a proposed rule to require tagging of high frequency trades," said Sen. Ted Kaufman (D-Del.). "This is the first step to ensuring the SEC can better understand high frequency strategies and detect any manipulative algorithms."


By Rachelle Younglai

Original Story:
http://www.hedgeworld.com/news/read_news.cgi?story=legl2511.html§ion=legl

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