By Jonathan Spicer
NEW YORK, Jan 11 (Reuters) – Regulators are set to stir old controversies this week when they meet to release a paper on high-frequency trading and the broader U.S. equity markets, expected to review myriad changes over the last decade.
The U.S. Securities and Exchange Commission will vote Wednesday on whether to issue the concept release on everything from placing traders’ computers next to exchange computers, known as co-location, to the value of anonymous venues known as dark pools.
The SEC, under pressure by some lawmakers and others to do the comprehensive review despite no serious problems in stock markets, said this month the paper would look at “the performance of equity market structure in recent years,” and solicit public comment.
Industry sources said they expect the SEC to raise thorny questions such as the possibility that high-frequency traders’ lightning-quick algorithms prey on less-sophisticated investors, and whether to saddle them with new obligations.
The regulator is also expected to ask whether changes are needed to the sweeping Regulation National Market System (Reg NMS), which in 2005 forced exchanges to route orders to the venue with the best price — a move that connected U.S. markets like never before, and set them apart from other regions.