Israel’s Central Bank Wants Algo Scrutiny

There will be no “Algos Gone Wild” in Israel’s stock markets if its regulator gets its way.

As first reported in Calcalist Tech, the country’s leading regulator, Bank of Israel, said it wants to review the need to restrict HFT in all financial assets traded on the exchange. Since HFTs employ algorithms and hyper fast computer technology, the move is in line with the country’s desire to reduce the risk of trading and exchange failures and manipulation.

Over 90% of the activities on the Tel Aviv Stock Exchange are algorithmically performed, according to a new research paper recently published by Israel’s central bank. While the number of algorithmic automated high-frequency trading (HFT) activities on the exchange is higher than most stock exchanges, the actual rate of transactions they execute, between 23% and 35%, is significantly lower than global standards, the report said.

While algorithmic trading can contribute to the trading quality, it adversely impacts slower, non-algorithmic traders, increases information asymmetry, and negatively impact asset liquidity, the bank concluded.

Related articles

  1. Fitch Learning found 82% of women play down their personal and professional achievements.

  2. Acceleration of a systematic approach and performance-driven execution has been a big theme.

  3. FX Global Code has increased focus on FX execution quality.

  4. Daily Email Feature

    Trading in a World of VUCA

    By Clare Witts, Director, Market Structure, Asia Pacific, and Tom Augarde, Director, AES Coverage, Asia Pacifi...

  5. Some material changes have come out of ESMA’s review of algorithmic trading.