HFT so defined has or will have two sorts of regulatory consequence: it brings the traders under the MiFID umbrella, so that they have to be authorised as investment firms under Article 2(1)(d)(iii). Furthermore, it carries with it record-keeping requirements. MiFID requires that an investment firm engaged in such behaviour "shall store in an approved form accurate and time sequenced records of all its placed orders, including cancellation of orders, executed orders and quotations on trading venues." These records shall be available to the national competent authority on request.
Option 1 would identify HFTs based on whether the infrastructure is designed to “minimise latency and the capacity to transfer data to the venue.” The identification of the pertinent parameters is straightforward, such as the computation of the number of intra-day messages. Option 2, on the other hand, would focus on the median daily lifetime of orders. This "relates to a calculation that trading venues regularly undertake nowadays", which will make it convenient. Also, the second option – unlike the first – will not have to be "revised frequently so as to keep pace with the latest technological developments".
One point on which ESMA seems to have made up its own mind pretty firmly is that HFT will be identified "at the member or participant level". Thus, "if a member’s or participant’s strategy falls under the definition of high-frequency trading strategy in one trading venue, that member/participant should be considered as subject to MiFID provisions across the EU".
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