Does co-location need regulation?

We've noted at FierceFinanceIT that there are broad portions of the U.S. trade execution apparatus--which cannot be overlooked by issuers--that are up in the air from a regulatory point of view. The issues on the table right now are new and in some ways scary: High-frequency trading, short selling, naked access.

To some extent, the issues boil down to the trading efficiencies effected by technology. The speed with which modern trades take place is truly mind-boggling. We may soon be measuring execution times in nanoseconds. To get there will require even more reliance on colocation, which positions trading technology near execution venues to shave as much time as possible off trades. We've noted the significance of this movement.

While the rise of colocation seems inevitable, one issue that has yet to be decided is how it should be regulated. The SEC has asked market participants to comment on whether collocation provides unfair advantages to some parties. We'll read the comments with great interest. Already, Nasdaq OMX CEO Robert Greifeld said he supports regulation of some sort. "We are in fundamental support of the regulation of the co-location business," he told reporters. "We have run the business as from day one expecting to be regulated."

For more:
- here's a Reuters article on Greifeld

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Latency data as a competitive advantage
High-frequency trading hitting a plateau?