Interview on limiting high-frequency trading

Big banks in particular benefit from high-frequency trading, criticizes Bremer Landesbank’s chief economist Folker Hellmeyer in im–Interview. It is high time to restrict these deals. So far, big banks would skim the cream on the stock markets.

Could you briefly explain how this high frequency trading works?

Folker Hellmeyer: High-frequency trading is a form of trading that is operated by the international banking aristocracy – the big banks. Enormous volumes are traded within a very short time – we’re talking about nanoseconds. And so we skimmed the cream on the stock markets by the big banks. This is a highly capital-intensive business, but it is very profitable.

Folker Hellmeyer has been chief analyst at Bremer Landesbank since 2002. Before that, a trained banking specialist worked as a trader and analyst at Deutsche Bank and Landesbank Hessen-Thuringen. Hellmeyer is an expert in international financial markets.

How do you feel about the regulations that have now been adopted??

Hellmeyer: In my opinion, these restrictions are perfectly justified. The fact is that high-frequency trading does not have a lasting positive effect on the liquidity situation. Over the past few years, it can be seen that volatility, i.e. the mobility of the stock markets, has increased independently of the general economic data and company data. We have also seen accidents from high-frequency trading.

The next aspect is that exchanges must guarantee all participants equal access. However, major international banks are preferred for this type of trade. That must be turned off.

And as a third aspect, we have to decelerate the global financial markets so that the financial sector can once again assume a serving function for the real economy. And the regulations that have now been adopted are a good instrument for this.

"Above all, the real economy benefits"

Who benefits from a speed limit in high-frequency trading??

Hellmeyer: The real economy and the people who work in it benefit from this because their companies are valued more fairly. The enormous fluctuations that we know from the past and also the accidents on the markets will decrease. And hopefully there will be a new humility in the big banks.

And what about the little Otto normal investor with his small share portfolio?

Hellmeyer: If the excessive fluctuations in the stock markets are reduced a bit, then the clarity and sustainability of movements are also increased. That must be the goal.

In January, some EU countries agreed to introduce a financial transaction tax. Isn’t it already taking the pace out of stock trading?

Hellmeyer: Although the financial transaction tax also has a decelerating effect, it is not comparable to the regulation of high-frequency trading. With the financial transaction tax, we have a very large package insert with a lot of side effects. Small private investors are also financially burdened. This is not the case with high frequency trading. It is precisely those who were responsible for the financial crisis that will be hit, and we will take away a piece of their plot material.

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