--- title: HFTs and Algos Pose Quandary description: HFTs and Algos Pose Quandary --- ![websites-group](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/new-MMG-01.svg) [![](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/dropdown-new-marketsmedia-logo.svg)](https://www.marketsmedia.com/) [![](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/dropdown-menu-traders-redlogo.svg)](https://www.tradersmagazine.com/) [![](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/dropdown-menu-bestexe-logo.svg)](https://www.bestexecution.net/) [![](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/dropdown-menu-fidesk-logo.svg)](https://www.fixglobal.com/) [![](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/dropdown-fixglobal-new-logo.svg)](https://www.fixglobal.com/) - [*Facebook*](https://www.facebook.com/MarketsMedia/) - [*Twitter*](https://twitter.com/marketsmedia) - [*Linkedin*](https://www.linkedin.com/company/markets-media-llc) - [Newsletter](https://articles.marketsmedia.com/hfts-and-algos-pose-quandary#popup-newsletter) #### Want the latest news on securities markets -- FREE? Sign up to receive exclusive articles on topics including: - Equity market structure - Profiles of buy-side investment firms - The evolution of multi-asset-class trading - Regulation and its implications for markets - The search for liquidity in fixed income markets - The convergence of fintech and capital markets Select one or more newsletters you would like to receive: menu [![Markerts media](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/header%20logo.svg "Markerts media")](https://articles.marketsmedia.com/) - [Regulation](https://articles.marketsmedia.com/tag/regulation) - Regulation - HFTs and Algos Pose Quandary Search - [Home](https://articles.marketsmedia.com/) - [Trending](https://articles.marketsmedia.com/tag/trending) - [Featured](https://articles.marketsmedia.com/tag/daily-email-feature) - [Sectors](https://articles.marketsmedia.com/tag/sectors) - [From The Markets](https://articles.marketsmedia.com/tag/from-the-markets) - [AWARDS](https://articles.marketsmedia.com/tag/events) - [Newsletter](https://awards.marketsmedia.com/newsletter-sign-up) - [Newsletter](https://articles.marketsmedia.com/hfts-and-algos-pose-quandary#popup-newsletter) Hide search Search - NewsLetter ![](https://articles.marketsmedia.com/hubfs/Imported_Blog_Media/trading-up-occ-iex-select-board-members-citadel-lands-lieblich-573x379-Jul-07-2022-09-34-11-57-AM.jpg) [ON THE MOVE: Citi Hires Artie Ambrose;...](https://articles.marketsmedia.com/on-the-move-citi-hires-artie-ambrose-natalie-a-brown-to-mesirow) ![](https://articles.marketsmedia.com/hubfs/Imported_Blog_Media/Depositphotos_445735906_L.jpg) [Trading Adapts to ESG and Sustainable...](https://articles.marketsmedia.com/trading-adapts-to-esg-and-sustainable-investing) ![](https://articles.marketsmedia.com/hubfs/Imported_Blog_Media/iStock-917493152-Jul-07-2022-09-34-19-09-AM.jpg) [Focus on FX Execution Connectivity](https://articles.marketsmedia.com/focus-on-fx-execution-connectivity) ![](https://articles.marketsmedia.com/hubfs/Imported_Blog_Media/Depositphotos_333839538_L.jpg) [TRACE Turns 20](https://articles.marketsmedia.com/trace-turns-20) 01.20.2012 By Terry Flanagan Regulation # HFTs and Algos Pose Quandary 01.20.2012 By Terry Flanagan [Share](https://www.facebook.com/share.php?u=https://articles.marketsmedia.com/hfts-and-algos-pose-quandary) [Tweet](https://twitter.com/intent/tweet?text=US+ETFs+Have+Record+Net+Inflows&url=https://articles.marketsmedia.com/hfts-and-algos-pose-quandary) [Share](https://www.linkedin.com/cws/share?url=https://articles.marketsmedia.com/hfts-and-algos-pose-quandary) Eighteen months after flash crash, industry mulls market-make obligations. More than 18 months after the May 6, 2010 flash crash brought algorithmic and high-frequency trading into the headlines, regulators and market participants have yet to agree on the meaning of the terms, much less what regulatory steps, if any, are needed. The issue of market maker obligations for HFTs is conflicted. One the one hand, imposing obligations could prevent the disappearance of liquidity that triggered the flash crash. On the other hand, a heavy-handed regulatory regime could distort market making activity and create the very conditions it was intended to prevent. “There are few things that create fear and loathing for regulators as much as the difficulty in solving obligations for liquidity provisioning,”  Louis Lovas, director of solutions at OneMarketData, a provider of historical tick data and complex-event processing (CEP) technology, told Markets Media. “Regulators have to eventually face this difficult issue.” Incentive rebates to keep participants in market during stressed market conditions are a potential remedy, although not without drawbacks. “This is not an easy problem to solve with a good chance of backfiring,” Lovas said. “Firms could simply move to more regulation friendly markets, resulting in thinner liquidity and creating the very drought-like conditions regulators want to avoid.” Regulators on both sides of the Atlantic appear to be conflicted over high-frequency and algorithm trading, on the one hand saying that it needs to be controlled while on the other recognizing that it represents the wave of the future. This ambivalence is reflected by the fact that the new MiFID directive calls for market-making obligations to be imposed on high-frequency traders. Yet only a few weeks prior to the MiFID release in October, the U.K. government released a report on HFT that concluded that the pace of development or technology innovations in the financial markets, and the speed of their adoption, are likely to increase in the future. Regulators have floated the prospect of subjecting algorithms to inspection, but opponents say this is unnecessary given the ban on unfiltered, or naked, sponsored access, and other measures already in place. “The Market Access Rule, exchange-monitored risk checks and the multitude of watchful counterparties will prevent anything but minor Infinium Capital-style skirmishes from occurring,” Lovas said. Any additional proposed regulations for algos (i.e. controls and/or source code inspection) are unnecessary, said Lovas. [Share](https://www.facebook.com/share.php?u=https://articles.marketsmedia.com/hfts-and-algos-pose-quandary) [Tweet](https://twitter.com/intent/tweet?text=US+ETFs+Have+Record+Net+Inflows&url=https://articles.marketsmedia.com/hfts-and-algos-pose-quandary) [Share](https://www.linkedin.com/cws/share?url=https://articles.marketsmedia.com/hfts-and-algos-pose-quandary) ![email](https://articles.marketsmedia.com/hubfs/Markets%20Media/email.svg) ### NEWSLETTER SIGN UP And receive exclusive articles on securities markets ### Related articles 1. [![](https://articles.marketsmedia.com/hs-fs/hubfs/Imported_Blog_Media/trading-across-the-pond-Jul-07-2022-09-33-17-07-AM.png?width=376&height=250&name=trading-across-the-pond-Jul-07-2022-09-33-17-07-AM.png)](https://articles.marketsmedia.com/eu-achieves-electronic-trading-of-standardized-otc-derivatives) Regulation ## [EU Achieves Electronic Trading of Standard OTC Derivatives](https://articles.marketsmedia.com/eu-achieves-electronic-trading-of-standardized-otc-derivatives) ISDA warns on proposed changes to post-trade deferrals regime. 07.07.2022 By Shanny Basar 2. [![](https://articles.marketsmedia.com/hs-fs/hubfs/Imported_Blog_Media/iStock-522304914-Jul-07-2022-09-33-41-28-AM.jpg?width=376&height=250&name=iStock-522304914-Jul-07-2022-09-33-41-28-AM.jpg)](https://articles.marketsmedia.com/six-digital-exchange-collaborates-with-fireblocks) Fintech ## [SIX Digital Exchange Collaborates with Fireblocks](https://articles.marketsmedia.com/six-digital-exchange-collaborates-with-fireblocks) The partnership will focus on delivering an institutional custody solution for digital assets. 07.07.2022 By Shanny Basar 3. [![](https://articles.marketsmedia.com/hs-fs/hubfs/Imported_Blog_Media/Depositphotos_103566932_L-2.jpg?width=376&height=250&name=Depositphotos_103566932_L-2.jpg)](https://articles.marketsmedia.com/iosco-publishes-crypto-asset-roadmap) Regulators ## [IOSCO Publishes Crypto-Asset Roadmap](https://articles.marketsmedia.com/iosco-publishes-crypto-asset-roadmap) The IOSCO Fintech Task Force will collaborate closely with other international bodies. 07.07.2022 By Shanny Basar [![MarketsMedia](https://articles.marketsmedia.com/hubfs/MarketsMedia.svg "MarketsMedia")](http://marketsmedia.com) - [About us](https://www.marketsmedia.com/about-us) - [Careers](https://www.marketsmediagroup.com/careers) - [Contact](https://www.marketsmediagroup.com/contact) - [Advertise](https://www.marketsmediagroup.com/advertise) - [Newsletter](https://awards.marketsmedia.com/newsletter-sign-up) - [Corporate Site](https://marketsmediagroup.com) - © 2026 Markets Media Holdings LLC - - Terms & Conditions - Privacy Policy {{ standard\_footer\_includes }}