Historical financial penalty for high frequency trading


High-frequency trading or high-frequency transactions (or THF) involves executing financial orders at a very high speed using state-of-the-art computers using specific algorithms

At the beginning of December 2015, this practice is at the heart of a case in which the French Stock Exchange Sanctions Commission intervened. Two operators were then fined a significant amount, Euronext and Virtu.

Sanction has fallen for Virtu and Euronext

High-frequency transactions are a practice that we hear a lot about in the world of online trading. At the beginning of December 2015, it was mentioned because of a penalty decided by the French Stock Exchange Sanctions Commission. Two operators share a fine totalling €10 million. These are the American Virtu and Euronext.

Faced with this sanction, Euronext quickly reacted and denounced the decision as questionable, but also exaggerated and outdated, because it occurred several years after the facts. The financial operator quickly announced that it will appeal and bring the case to the Conseil d’Etat.

euronext high frequency trading

Why this measure?

It should be noted that the measure taken by the French Stock Exchange Sanctions Commission is not a coincidence. As for the American company Virtu, it is penalized because of the too many orders placed over a very short period of time, blurring the analysis of other investors and literally freezing the market. This happened almost 5 and a half years ago (between July and September 2009). Due to the nature of the operations undertaken by Virtu at the time, their volume and speed, the indicators got out of hand and it can even be said that the trends were manipulated. As for Euronext, it is “imprisoned” for having violated two essential obligations: to be neutral and impartial with regard to investors.

According to the French Stock Exchange Sanctions Commission, Euronext should not have allowed Virtu to intervene on a massive scale within its platform. In the end, the integrity of the market would not have been respected. Euronext officials believe that the penalty comes a little too late, especially since the market has evolved well since then. In particular, they point out that 2009 was the year in which pilot programmes were set up for new trading methods (particularly high frequency).

In any case, it should be noted that high-frequency transactions now account for nearly one in five transactions on Euronext. In addition, they concern liquidity contracts and are intended to optimise the market.