On 30 July 2012, the German Ministry of Finance published a discussion draft bill regarding High Frequency Trading for the German financial services sector in the form of an “Act for the Prevention of Risks and the Abuse of High Frequency Trading” (“HFTA”). The new rules amend various German laws to extend their application to high frequency and algorithmic trading. HFTA is expected to be finalised and in force in Germany as early as March 2013. The effects of the proposed HFTA are far-reaching and are likely to affect not only HFT firms based in Germany, across Europe and elsewhere (if they are members of an organised market, e.g. Xetra or Eurex, or multilateral trading facility (“MTF”) in Germany) but also any trading firm (including market makers) which uses algorithmic trading strategies for trading on its own account.
Definitions of Algorithmic trading -
The HFTA proposals introduce new definitions of ‘algorithmic trading’ and ‘algorithmic high-frequency-trading’ into German financial services legislation where they have not existed before. Firms falling within the ‘algorithmic high-frequency-trading’ definition will become subject to German regulatory authorisation and supervision. Organisational and technical requirements apply to firms falling within both these definitions. A summary of the proposed requirements is set out below.
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