Keep up to speed on High Frequency Trading (HFT)

HFT is the use of sophisticated algorithms to trade securities (stocks, derivatives, bonds) ever closer to the speed of light. Since its rise ten years ago, it has revolutionized financial markets, not always in the most positive way. The need to control abusive HFT trading strategies is obvious and various proposals to do this are being discussed now in Brussels (MiFID 2), Germany, France and elsewhere.

On January 16th 2013, a Finance Watch Member, WEED, and Finance Watch gave evidence on HFT at a public hearing of the financial committee of the German Bundestag. We made things clear: The German proposal as it stands now will not have any impact on the markets! Why? Read the statement from Finance Watch's Benoit Lallemand, our press release (in German) and watch the interactive video (in German) with Benoît answering the questions of the parliamentarians.

© Frédéric Hache / Finance Watch

Close the gap: New regulation on benchmarks needed

After the high-profile problems with LIBOR and certain commodities benchmarks, regulators are looking at new rules to reduce conflicts of interest in this crucial area, which helps to set the prices we pay for fuel, mortgages and other important items.

In its response to the European Commission's consultation, Finance Watch points out that we have plenty of regulations about financial products but none on the benchmarks on which they are priced. We argue that benchmarks' social benefits should be maximized and the possibility for miss-use tightly controlled. We would like to see a new regulatory regime to promote the core economic purpose of benchmarks and to safeguard their integrity.

Read the full consultation response and our press release.

Christmas presents: Britain's four big banks receive a combined subsidy of approx. £34.4 billion (© new economics foundation)

Big bank, big subsidy

Which sectors get the biggest hidden public subsidy: agriculture? aerospace? The answer is probably Europe's large banks, which enjoy an implicit funding subsidy worth tens of billions every year. This is because the market expects the government will never let them go bust and so offers cheaper funding. A bank with this implicit state backing can take significantly higher risks knowing that taxpayers will pick up the pieces if things don't work out (here's an explanation of how it works)

A UK think tank, the new economics foundation (nef), also a Finance Watch member, has published updated numbers to quantify the public subsidy of Britain's four big banks. nef estimates that, in 2011, Barclays, RBS, HSBC and Lloyds enjoyed a combined subsidy of £34.4 billion.

Dutch NGO and Finance Watch member SOMO did a similar study for the four largest Dutch banks: they reckon that ABN Amro, ING Group, Rabobank, SNS Reaal Groep enjoyed annual hidden funding subsidies of between EUR 4.1 billion and EUR 12.3 billion. No wonder the banks are fighting hard to avoid structural reform.

Win a book!

Have you ever asked yourself how money really works in our society? Well, you might consider reading "OUCH!", Paul Knott's new book. This provoking and entertaining book will give you some key information about the origins of money and how it works, as well as the human psyche and the quality of financial information you can have access to.

"We live in a world dominated by a system that most of us aren't aware of, never mind understand. When it comes to money and how it really works, most of us are too busy, too bored or too bewildered to think about it, despite being at the sharp end of the consequences. We simply don't recognise the game that is being played out in front of us. Well check your pockets; you're in for a nasty shock." The tone is set...

To win a copy of the book, send us the answer to the following question to friends@finance-watch.org, before 15 February 2013: In what year did a European bank start to print banknotes for the first time?

Info: Knott, P., OUCH!, Publisher: Pearson, 2012, 280 pages /
Watch a video interview with Paul Knott.

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On behalf of all at Finance Watch, I wish you a Happy Christmas and an inspiring 2013.

Kind regards

Thierry Philipponnat

Secretary General

The team thank all Finance Watch's donors. Private donors are very important for us because they ensure that we can fulfil our mission in complete independence.