High Frequency Trading: HFT and its Supervision

Why Should You Attend:

The primary reason to be concerned with HFT is the potential misuse of very strength it was meant to accomplish: its ability to detect patterns in the market place and act to take advantage of those patterns. To prevent damage to an organization’s reputation and its ability to conduct its business along with the imposition of significant fines, bad press, possible jail time and even the closure of your financial institution, it is necessary to know how to practically address the concerns presented by HFT by bringing together representatives from all concerned. This training program will seek to address these issues, while offering attendees a peek into the future of HFT.

Learning Objectives:

• To be conversant about the pros and cons of HFT.
• To understand, that going ineffectively regulated, what you can do to others by using HFT and other types of algorithmic trading, can be done unto you as well.
• To be aware that within the major concerns of abusive trading practices utilizing HFT includes market manipulation and front running which is akin to insider trading but with knowledge of the imminent executions of certain transactions.
• To provide assistance in understanding what may be reasonable and unreasonable intrusions in area of supervising the development and implementation of HFT.
• To review how other jurisdictions around the world view HFT and their plans in dealing with its supervision.
• To prevent the: negative press coverage that resulted after the Flash Crash of May 6, 2010; potential risks and damage to an organization after scandals we have experienced over the years; and to be aware of what reasonable and unreasonable regulation/supervision of HFT may include.

Areas Covered in the Webinar:

• What is High Frequency Trading and its connection to algorithmic trading
• History of HFT
• Pros and cons of HFT
• How some regulators in the U.S. and abroad appear to be approaching HFT and its supervision
• The Flash Crash of May 2010
• HFT impact on end of day trading
• The future of HFT – can technology outpace the SEC’s ability to regulate
• HFT supervisory practices
• Employee trading supervision

Who Will Benefit:

• Traders and compliance staff in trading floors/desks
• Business development areas at trading firms
• Broker/dealer branch management and investment banking compliance officers
• Training department
• Hedge fund managers
• Branch and compliance managers
• Institutional investors
• Individual investors
• Financial advisors
• Investors home mortgage
• Brokers
• Mergers and acquisitions bankers
• Senior-level bankers (managing director level and higher)
• Debt underwriters

Instructor Profile:

Aldo Martinez is a retired NYSE regulation vice-president, founder of AJM Advisory Services, and currently a partner in the law firm of Vella, Singer and Martinez, P.C. While at the NYSE, he headed a department with the mission to detect and investigate market trading abuses such as insider trading, market manipulation and front running. Also while at the NYSE, Mr. Martinez worked in market surveillance, enforcement and was director of regulatory quality review. Additionally, he represented the NYSE in the Intermarket Surveillance Group (ISG), a network of then about 35 exchanges, markets and regulatory associations whose stated purpose was to cooperate with each other regarding regulatory efforts and served a term as chairperson of the ISG. He holds a JD from Seton Hall School of Law, NJ and a BS in business administration from St. Peter’s University, NJ (SPU). He is an adjunct professor at SPU, teaching the MBA program.

His prior experience includes a position as assistant to the general counsel of former Spear, Leeds and Kellog (SLK) where he was involved with compliance matters. Mr. Martinez has consulted in developing regulatory frameworks in Australia, South America, Mexico and Eastern Europe where he has lectured and given seminars regarding securities regulation including detection, investigations and enforcement of market trading abuses including insider trading, market manipulation and others.

Topic Background:

The impact of technology on trading securities and commodities is no different than the impact of technology in our daily lives; it has changed the industry and each of us as investors and traders. Although not subject to general consensus, HFT can be traced back to the 1960s when stock the average trading volume reached 10 million shares a day at the NYSE resulting in a paper crisis that overwhelmed back office manual operations at broker/dealers. During the next five decades experienced the advent of electronic trading in our markets such as DOT (Designated Order Turnaround) at the NYSE on or about 1976 when the first physicists arrived on Wall Street and the SEC Regulation NMS (National Market System) began the structural change of the markets in the U.S. Followed in the 1980s by SuperDOT, a new version of DOT, leading to the rise of Program Trading much argued to have been a significant cause of the October 1987 market meltdown. The 1990s saw the DOTCom boom and NASDAQ’s expansion, “Best Quote”, the Display Rule and the rise of ECNs (Electronic Communications Networks). Followed in the 2000s by Decimalization and the repeal of NYSE Rule 390 allowing members of the NYSE to trade NYSE listed securities anywhere and on or about 2007 the transformation of the NYSE Specialist’s functions into just a market maker without certain previously market maintenance obligations, culminating in what we today as algorithmic trading and HFT.

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