Global body urges tough rules for high-speed trade

* Direct access to markets needs better oversight – IOSCO

* Suggestions mirror U.S. proposals

* High-frequency trading in the spotlight

NEW YORK, Aug 13 (BestGrowthStock) – A global body of securities
regulators proposed tough new guidelines to monitor high-speed
trading firms that enjoy direct access to electronic
exchanges.

The hedge funds, proprietary firms and others that have
“direct electronic access” (DEA) to securities markets should
be monitored for risky practices both before and after their
trades are made, the International Organization of Securities
Commissions (IOSCO) said in a report.

It also said brokerages that permit DEA are ultimately
responsible for the impact DEA orders have on the marketplace,
echoing muscular U.S. rules proposed early this year and meant
to safeguard markets from trading errors or abuse.
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In direct access — also called “sponsored” or “naked”
access — brokers approved to trade on an exchange rent their
access badges to outside traders, who are then able to shave
milliseconds off the time it takes to access markets.

The practice has spread from North America and Europe over
the past decade as markets increasingly went electronic, and as
algorithmic high-frequency trading played a more central role.

IOSCO suggested that brokers ensure their DEA clients meet
minimum financial standards; that they identify the firms to
regulators to bolster surveillance; and that markets that
accept DEA be able to effectively limit trading if necessary.

The eight principles set forth in the IOSCO report are
guidelines for its member regulators. Direct access is now
monitored by a patchwork of rules globally.
(Reporting by Liana B. Baker and Jonathan Spicer; editing by
John Wallace)

Global body urges tough rules for high-speed trade