"Barracuda Trading" Swims to the Fore in Europe

French finance minister Christine Lagarde yesterday told a French parliamentary committee that high -frequency trading (HFT) should be regulated "very strictly", and even banned in "exceptional" circumstances.

Lagarde's remarks stand in stark contrast with those of Alexander Justham, director of markets at the UK's Financial Services Authority, who told a liquidity conference in London that he foresaw "no inherent problem with the speed of trading rising."

The remarks come on the back of an announcement by the British Government this week that it is funding a study of how HFT might shape London as a financial centre over the next decade. Mark Holban, the UK's Treasury Secretary, said the project will look ahead to developments in financial markets, with a "prominent focus" on HFT.

HFT rose to prominence after the May 6th Flash Crash and the European Commission's review of Mifid, dubbed Mifid II, which is expected to result in far-reaching changes to the block-trading landscape due to its heavy concentration on HFT activities.

Kay Swinburne, the European Conservatives and Reformists economics spokesperson, and author of the Swinburne report, regarded as a key text likely to set the political tone for Mifid II, has spoken of "Barracuda trading strategies" distorting the markets.

Many would consider the recently published final version of the Swinburne report to be draconian in a number of areas, particularly relating to cash equities and dark pools. The original version, first published in July 2010, was subject to intensive lobbying by the parliamentary Socialist group in Brussels, which initially proposed no fewer than 1,700 amendments.

Swinburne yesterday said the review would transform the European trading landscape and urged the industry to help shape the nature of the reforms, which will go beyond the equities market.