Government explores the future challenges and opportunities of computer trading in financial markets
Computer/Internet/Software Articles
Add an article Back to Articles
Issued 23 November 2010 - BIS
The Government Office for Science today embarked on its latest
Foresight project, which will examine the challenges and opportunities
presented by technological advances in financial markets worldwide.
In recent years the ways in which financial markets operate
have been transformed by fast-paced technological progress. For
example, the volume of financial products traded through computer
automated trading - taking place at high speed and with little human
involvement - has increased substantially in the past few years. Today,
over one-third of the UK’s equity trading volume is generated through
high frequency automated computer trading while in the US this figure
is closer to three-quarters.
The Foresight project The Future of Computer Trading
in Financial Markets, sponsored by Her Majesty’s Treasury and
led by the Government Office for Science under the direction of the
Government’s Chief Scientific Adviser, Professor Sir John Beddington,
aims to make a significant contribution to the efficiency, integrity
and resilience of financial markets, by identifying options for policy
makers in the UK and internationally.
The Foresight project will explore how computer generated
trading in financial markets might evolve over the next decade or more,
and how this will affect:
- Financial stability;
- Integrity of financial markets, including price information
and liquidity;
- Competition;
- Market efficiency in allocating capital;
- Transaction costs on access to finance; and
- Future role and location of capital markets.
It will also assess options for addressing the challenges
ahead, and consider how the opportunities offered by advancements in
computer technologies could be capitalised upon by the financial sector.
Government Chief Scientific Adviser, Professor Sir John
Beddington said:
“It’s essential to develop a better understanding of how
computer trading in financial markets might evolve, in order to help
protect the UK and other economies against technology-led economic
instabilities.”
“This timely and important investigation will have important
findings not only for the UK economy but worldwide. I am delighted that
the Financial Secretary to the Treasury Mark Hoban has agreed to be the
sponsoring minister for this project and I look forward to working with
him.”
Financial Secretary to the Treasury Mark Hoban, MP said:
“Computer automated trading has become central to the
functioning of financial markets. This project will engage the world’s
leading experts to assess the future economic and regulatory
consequences of the evolution of computer trading.”
The project will appoint an international High Level
Stakeholder Group to steer the overall direction of the project, which
will be chaired by Mr Hoban.
The High Level Stakeholder Group will include senior
representatives from important organisations in the public sector, the
research community and business.
A group of leading experts will work with Foresight to guide
the project and ensure its findings are of a high standard. A chair for
this group will be appointed shortly. Current membership is as follows:
- Andy Haldane - Executive Director, Financial Stability,
Bank of England
- Professor Charles Goodhart - London School of Economics
- Professor Oliver Linton - London School of Economics
- Kevin Houstoun - Chairman, Rapid Addition; Co-Chair, Global
Technical Committee, FIX Protocol Limited
- Professor Philip Bond - University of Oxford and University
of Bristol
- Professor Dave Cliff - University of Bristol
NOTES:
- Foresight is in the Government Office for Science
(GO-Science). GO-Science supports the Government’s Chief Scientific
Adviser in ensuring that the Government has access to, and uses, the
best science and engineering advice. It is located within the
Department for Business, Innovation and Skills.
- The UK Government's Foresight Programme helps Government
think systematically about the future. Foresight uses the latest
scientific and other evidence to provide advice for policymakers in
addressing future challenges.
- Further details about the project can be found on the
Foresight website (http://www.bis.gov.uk/Foresight)
About the Author
© Crown Copyright.
Material taken from the BIS Department for Business, Innovation and
Skills. Reproduced under the terms and conditions of the Click-Use
Licence.
