A Commodity Futures Trading Commission (CFTC) subcommittee today is expected to propose a roughly 60-word definition of high-frequency trading that would define it broadly, the Wall Street Journal reported today. The announcement follows three months of meetings by an industry group that was formed by the CFTC to help the agency wrestle with the impact of rapid-fire trading on financial markets. Such trades now generate more than half of all U.S. stock- and futures-trading volume, and critics claim that the surge in high-frequency trading has left Wall Street more vulnerable to computer-driven failures that sap investor confidence. According to a draft version, the CFTC subcommittee working group is proposing to define high-frequency trading as a form of trading that uses sophisticated computer programs to make automated decisions in the markets, with no human decision-making involved in individual transactions. The draft also defines such trading as using technology to amplify the speeds at which firms send orders to exchanges and other trading venues, and generating large volumes of messages, orders and cancellations compared with other, slower types of trading.
