A European Parliament committee has voted to limit ultra-fast computerised trading on food commodity and energy markets in an effort to curb the kind of speculation that contributed to food price spikes in 2007-08.
The Committee on Economic and Monetary Affairs unanimously voted to implement a 500-millisecond (half a second) minimum time period during which an order should be held without cancellation or modification on Wednesday, in order to slow down high frequency trading on commodities that could cause food prices to surge. The draft regulation still needs approval from the full European Parliament and Member States before it becomes law.
Ahead of the vote, German MEP Markus Ferber (European People's Party) said: "High-frequency trading has not been regulated yet. To decelerate high-frequency trading, we are calling for a minimum resting period of 500 milliseconds for orders and for fees for single high-frequency activities. This way, the purely speculative business with high-frequency transactions will become unattractive.”
The United States has already implemented a similar measure.
Meanwhile, NGOs have been calling for curbs on high frequency trading to ease pressure on food commodity markets.
Anne van Schaik, accountable finance campaigner for Friends of the Earth Europe, said: "MEPs have a unique opportunity to curb food speculation in commodity markets. Negotiations are going in the right directions but it is crucial that MEPs make sure the regulations work and put the hunger of people before the hunger of the financial sector."
Meanwhile, Oxfam said that it welcomed mandatory limits on speculation but said there were loopholes that needed to be plugged in the proposed law.
EU policy advisor Marc Olivier Herman said: “Betting on food prices is unacceptable in a world where nearly 1 billion people are going hungry. Today’s vote shows that there is a majority in the European Parliament in favour of limiting harmful financial speculation. However the text adopted today falls short of what is needed to tackle food speculation.”
The Bank of England estimated that about 40% of European trading in 2010 was high frequency trading.