Professor Brian Scott-Quinn said:
“The Report provides an excellent hors d’oeuvre to future studies of computer trading. As the report sadly notes, we simply do not have enough data at present to be able to provide sound scientific evidence in support of new regulations of this area of financial activity. Thus despite producing a valuable report, we still do not know the answers that the Report might have hoped to find.
“At a time when the UK government is considering withdrawing from various EU bodies and is concerned by the encroachment of EU regulation of financial markets, the Report makes clear that the UK cannot sensibly regulate on its own in this area as multiple trading venues across many countries trade the same securities. Thus UK over-regulation on its own could be ineffective and simply cause business to shift to other countries.
“Sadly, the Report seems to have researched the impact of computer trading in large capitalisation stocks trading on equity markets. These are the stocks which may not need any additional liquidity of the type provided by high-frequency traders. The real societal problem is that we have not yet found any mechanisms to provide adequate liquidity in small and medium sized enterprise bonds and shares. The Report remains silent on such issues.
“It is also silent on the issue of improving liquidity in all bond markets and in particular markets for corporate bonds. As bank finance in Europe and the UK diminishes in quantity and rises in price, bond markets become ever more important. It is to be hoped that if the proposal that the UK government set up an ‘Office of Financial Research’ is effected that this body will have include issues relating to bond markets in its remit.”