Germany forges ahead with trading bill Frustrated with the lack of progress at European level, Germany is going it alone on the regulation of high-frequency trading with a bill that could place these computer-driven trades under scrutiny on German markets by the middle of 2013. Chancellor Angela Merkel's cabinet is scheduled on Wednesday to sign off on draft rules which would force market participants who trade directly - and those who use a broker - to be certified and policed by exchange operators such as Deutsche Börse and the national financial regulator, BaFin, government officials said. While the legislative process in the Bundestag, Germany's parliament, is expected to take at least half a year, Berlin hopes its new-found activism to regulate HFT will help the EU quickly to forge joint rules - and serve as a popular example of government action in the German election in 12 months time. EU governments and the European parliament cannot agree about an EU commission proposal to regulate high-frequency trading, or HFT. For example, EU lawmakers want a half-second delay between buying and selling, but most member states are blocking this. The German government's bill, seen by the Financial Times, has no provision that forces HFT traders to hold on to the securities they buy for a set length of time. Berlin believes that this kind of delay would not take speed or volume out of the markets. HFT is under scrutiny by governments as they believe it has made markets more volatile. The 2010 "flash crash" of US financial markets has been attributed to the computer-driven, high-volume trading of securities, and a computer malfunction at Knight Capital again ruffled US markets this summer. The German government estimates that about 40-50 per cent of trading volumes on the country's financial markets are now driven by algorithm-based computer trading. As a result, Berlin wants high-frequency traders to register with regulators, who will have access to their trading algorithms at all times. Trades driven by these complex calculations will also be labelled to help watchdogs and other market players. Berlin reckons its new rules will affect about 20 companies who trade directly on German markets, and about 80 indirect traders. Switzerland-based hedge funds using London intermediaries, for example, will in future have to be certified by German regulators to trade in the country. Costs for all companies are expected to hit about €20m. The bill envisages that exchange operators would be responsible for triggering "circuit breakers" if a security or an entire market behaves erratically. Together with the BaFin financial regulator, they will also be responsible for fighting market abuse. Market manipulation will be punished if regulators can prove a trader placed an order with no intention of buying - a practice that officials said some players used to influence securities prices. Exchange operators will also be asked to set limits for trade-to-order ratios, and fine players who breach them or delete too many orders.