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High-Frequency Trading Needs Tighter Control, AMF’s Jouyet Says

Regulators may need to develop “circuit-breakers” that halt high-frequency trading practices like those that exacerbated a stock market plunge a year ago, said the head of France’s financial markets regulator.

The measure, “rather like a pilot switching from autopilot to manual mode when he needs to take control, is necessary in my view, in the same way as what has been decided in the United States,” Jean-Pierre Jouyet, chairman of Autorite des Marches Financiers, said in a speech at the International Capital Market Association annual conference in Paris today.

High-frequency trading is a computer-driven trading method in which firms may make thousands of transactions a second. The so-called flash crash of May 6, 2010, which temporarily erased $862 billion in stock value, spurred U.S. Securities and Exchange Commission proposals for market circuit breakers and plans to establish a system for cross-market surveillance.

The rise of high-frequency trading techniques has made it harder for investors to analyze movements in markets, Jouyet said. “Precise rules” are required to ensure markets can “return to their role of financing the economy,” he said.

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