So what the hell is naked access? Naked Access allows traders to see what is happening on the exchanges themselves. This gives them a 30 millisecond window (yes trading is performed by sophisticated computer algorithms in the microseconds), to view trades before being executed. Thus, those with the technology, such as Goldman Sachs can execute high frequency and fast trades.....before the rest of investors see the various stock exchange orders.
Naked access gives trading firms, using brokers' licenses, unfetted access to stock markets. The firms, usually high-frequency traders, are then able to shave microseconds from the time it takes to trade.
Well, Public Citizen just put up a new blog post explaining WTO trade rules and how these rules might lead to the WTO trade complaint case against the SEC. The WTO might claim banning high frequency trading (known as HFT) is a barrier to trade.
HFT would almost certainly fall under the definition at Annex’s 5(a)(x): “Trading for own account or for account of customers, whether on an exchange, in an over-the-counter market or otherwise.” Even if it didn’t, the list in the Annex is illustrative, not exhaustive.
It's taken a full year before the first real regulation has come down the pike. But finally we can see something.
(Bloomberg) -- The U.S. Securities and Exchange Commission proposed banning flash orders after lawmakers said the practice may give hedge funds an advantage over other investors.
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