In response to an earlier article in Het Financieele Dagblad, the chairman of Euronext, the Amsterdam stock exchange operator, responds that the trading system complies with European regulations. Mathijs Giltjes, researcher at Erasmus Graduate School of Law, and Arnoud Pijls, assistant professor of Corporate Law & Capital Markets at Erasmus School of Law, write in the Oxford Business Law Blog why they doubt this.
In an era where the trade in financial instruments approaches the speed of light, even speed advantages of a few microseconds are crucial for the modern trader, Giltjes and Pijls write. Against this background, it is detrimental that Euronext supplies stock market information at different speeds to different parties. In principle, it is permitted under European legislation to offer a private feed to traders by providing them with the option of linking systems directly to the stock exchange operator's trading system. However, the fuss about this topic has its origins in delivering different speeds between these private feed parties without communicating about this.
Regardless of whether the head start of a few microseconds of parties who conclude a sale with each other is permitted under European regulations, Giltjes and Pijls wonder whether trading based on this information lead can be qualified as insider trading. Apart from the two traders who receive the sale's knowledge more quickly, the information about this transaction is not yet public information to the rest of the traders in the market. According to Giltjes and Pijls, there are, therefore, good reasons to argue that there is an infringement of the level playing field between investors, which the European legislator is trying to protect. In a more general sense, they even argue that offering these private feeds in the first place constitutes a systematic violation of the trading ban on insider trading.
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Read the full blog in the Oxford Business Law Blog.
About the authors
Mathijs Giltjes conducts doctoral research into flash traders and market abuse at Erasmus School of Law. Arnoud Pijls wrote his dissertation on damage assessment in case of liability for misleading stock market reports.
