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High-frequency trading

High-frequency trading (HFT) is a much-discussed trading technology allowing securities transactions to be executed via independently acting, extremely fast and powerful computers. This technology was developed in the course of the advancing technological evolution of the financial markets and already constitutes a significant share of the trading volume on European exchanges today. It thereby renders a key contribution to increasing liquidity in securities trading and reducing spreads. The improved price quality on the markets also benefits companies by way of lower financing costs. High-frequency trading thus plays a major role in efficient and functioning capital markets and bears economic benefits.

However, as with other technological innovations, certain risks such as increased volatility, market manipulations or technical errors cannot be excluded in connection with high-frequency trading. Deutsche Börse Group effectively counteracts these risks posed by high-frequency trading through comprehensive safety measures such as plausibility checks and circuit breakers, thereby safeguarding proper conduct of trading. High-frequency trading has been regulated in Germany since 15 May 2013 by the Act on the Prevention of Risks and Abuse in High-Frequency Trading (High-Frequency Trading Act) and addressed at the European level in the context of the revision of the Markets in Financial Instruments Directive (MiFID). This page contains a number of key elements of the High-Frequency Trading Act plus related links.

Designation of trading algorithms

Since 1 April 2014, direct trading participants have been required to designate or flag trading algorithms on Frankfurter Wertpapierbörse (FWB®, the Frankfurt Stock Exchange). At the request of the exchange supervisory authority or market supervision, the trading participant must at any time furnish information on the trading strategies, parameters and concentration limits that underlie the designated algorithms. Corresponding information on the data to be provided can be found on the exchange supervisory body websites.

Order-to-trade ratio

The law requires trading participants to guarantee an appropriate ratio of their order entries, modifications and deletions to the transactions actually executed. Details on implementation can be found in the Regulations for the Frankfurter Wertpapierbörse, §72b.

Fees for excessive system usage

The law requires the stock exchange to charge fees for excessive use of the trading systems, especially a disproportionately high number of order entries, modifications and deletions. Details on implementation can be found in the Price list for the use of the Frankfurter Wertpapierbörse trading system and XONTRO system (see chapter 2.2.4).