Lew Says Regulators Undecided on High-Frequency Trading

U.S. Treasury Secretary Jacob J. Lew said the government is trying to understand high-frequency trading in financial markets and indicated he’s not sure yet whether it should be subject to stricter regulation.

“I don’t want to jump to a conclusion that there is a need for a regulatory response,” Lew said today in response to a question at a conference in New York. “We first have to understand whether there is a problem that traditionally rises to the level of regulatory concern.”

Regulators are looking at two issues, Lew said: whether the financial system is designed to manage the “transactional pace” of high-frequency trading, and whether firms using the technique have any unfair advantages when connecting to exchanges.

“I’m not concluding that there is a problem in either area,” Lew said. “Generally, we don’t regulate to drive investment decisions in a substantive way one way or the other.”

The Securities and Exchange Commission has been studying the role of high-frequency traders for at least five years. SEC Chair Mary Jo White said in June that the agency would require high-speed proprietary traders who so far have escaped regulation to register as broker-dealers. The regulator also plans to develop a rule that will restrict short-term trading strategies that can disrupt markets and heighten volatility, she said.

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