Speed limits would cool the "arms race" of ultra-fast trading that has sparked price "abnormalities" and may destabilise markets, a top Bank of England official told CNBC.
Andrew Haldane, executive director for financial stability, said in a 25-page speech in Beijing that rapid growth in so-called high frequency trading (HFT) has come to dominate stock markets and is raising "contagion" concerns.
"It is not just talk. As recently as 2005, HFT accounted for less than a fifth of U.S. equity market turnover by volume. Today, it accounts for between two-thirds and three-quarters," Haldane said.
HFT has helped to lower bid/ask spreads in markets but there is also evidence of increased volatility with abnormalities in prices occurring increasingly more often, Haldane said.
The United States looked at the role of ultra fast trading in last year's "flash crash" which briefly sent Wall Street blue chips into a tailspin.
"The flash cash was a near miss. It taught us something important, if uncomfortable, about our state of knowledge of modern financial markets," Haldane said.
The U.S. Securities and Exchange Commission is looking at how to rein in computerised trading that use algorithms to flood the market with orders in microseconds, often cancelling most of them….
Find out more at http://www.cnbc.com/id/43680673
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