European Financial Industry Has Serious Concerns Over HFT [SURVEY]

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Despite concerns about high frequency trading (HFT), European financial industry participants haven’t changed how they interact with markets, a survey from ConvergEx points out.

In its “European Equity Market Structure Survey” results released on May 15, 2014, ConvergEx highlights that less than a third of respondents believe that European equity markets are currently fair for all participants.

Interestingly, in April, a survey by ConvergEx Group of U.S. industry participants also found similar results.

Not fair to all participants

ConvergEx Group’s ‘European Equity Market Structure Survey’ was conducted during May 6th to May 9th, 2014, with 131 respondents from buy-side firms (asset managers, hedge funds), sell-side firms (banks, broker-dealers), trading venues, service providers and other financial industry participants.

The survey highlights that respondents to the survey expressed significant concerns about the way European markets are currently structured and the role that HFT plays. As can be deduced from the following graph, 28% of respondents believe European equity markets are fair for all participants, while a significant 43% believe European equity markets are not fair for all participants:

Fairness to participants


The survey also highlights that almost twice as many respondents believe that HFT is harmful (28%) as believe it is helpful (14%). The following graph highlights only 19% of respondents believe HFT is helpful or very helpful to market participants:

HFT harmful

In wait-and-watch mode

Interestingly, the survey highlights that despite concerns, the HFT debate hasn’t led to a significant changes by industry participants. For instance, less than one-quarter (21%) reported making any changes at all. The following graph points out that 68% responded that the recent debate regarding HFT has not caused them to change the way they interact with the European equity markets, while only 19% have made slight changes:

HFT impact - Not made much changes

The survey also points out that financial industry participants are almost evenly split on their view of regulatory changes. As can be deduced from the following graph, only about one-third (34%) of respondents believe current level of regulations are appropriate for today’s market structure:

Market regulation

The respondents to the ConvergEx survey were divided on whether European equity markets could withstand the volume resulting from a geopolitical crisis or other large volatility shock. As revealed in the following graph, 40% respondents are confident that markets could handle a large volatility shock, while 32% of the respondents are not confident or not-at-all confident that markets could handle a large volatility shock:

Markets handling geopolitical crisis


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About the Author

Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports

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