Prop trader throws down gauntlet to regulators on latency

Regulators investigating latency and the manipulation of smart order routers are unlikely to ever prevent widespread manipulation, a prop-trading fund manager has warned.

Regulators investigating latency and the manipulation of smart order routers are unlikely to ever prevent widespread manipulation, a prop-trading fund manager has warned.

‪Speaking at the TradeTech Conference in Paris, Victor Lebreton, managing director of prop trading fund Quant Hedge, acknowledged that regulators were now looking more closely at smart order routing, but suggested they were unlikely to ever outwit the quick thinking of the industry.

‪He said: "There is some understanding that the regulator [now] has to have around this technology. I don't know what they can do about it because people are always very innovative in the finance world."

‪Lebreton's comments were preceded by the thoughts of Julien Kockelkoren, head of trading and execution, Capital Fund Management, who acknowledged that global regulators were now focussed on identifying companies looking to manipulate the market.

‪Kockelkoren said his firm has a research team of eight people, with two people working on smart order routing albeit not full time.

‪He said: "In the long term, we think it is worth the effort because we think we understand the market structure better by doing our own research."

‪The Capital Fund Management trading boss added that suggestions that asset managers would increasingly work together by sharing information to design their own order routing solutions were somewhat wide of the mark.

‪He said: "I think it is a bit unrealistic to imagine that the buy-side would collaborate. Specific features of order routing are confidential so they wouldn't want to disclose too much. However, the sell-side has specific knowledge which can help."

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