5 See Benos, E, Brugler, J and Hjalmarsson, E (2015), ‘Interactions among high-frequency traders’, Bank of England Working Paper, No. 523. 6 See Kervel, V, and Menkveld, A. J (2017), ‘High-frequency trading around large institutional orders’, Working paper. 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  7  In equity markets, for example, there has been a shift away from trading on ‘lit’ exchanges (Chart 8). The market has moved more towards ‘off-book’ trading, where participants transact bilaterally, seeking not to 8  9  reveal information on their trading intentions, and to dark venues , such as broker-crossing networks and some multi-lateral trading facilities. 10  Meanwhile, FX markets have seen a move away from ‘exchange-like’  11  platforms toward trading methods offering a more restricted range of counterparties and/or offering visibility to participants on who they are trading with (Chart 9). The aim is to disclose less information to the broader market, while counterparty awareness allows monitoring of metrics such as fill ratios and market impact over time. Second, market participants’ desire to avoid revealing information on their trading intentions and seek the best price has led them to split up large orders, including via the use of algorithms. This can be seen in a reduction in trade sizes (Chart 10), as well as an increase in the rate at which orders in some markets are updated or cancelled. Here at the Bank we want end-users to both benefit from and be confident in the effectiveness of financial markets.
The changing distribution of risks for individual firms  Moving on to my second example, even in the absence of systemic spill-overs from flash episodes, fast markets alter the pattern of risks that individual market participants are exposed to. And there good grounds for concluding that more needs to be done to ensure market participants take account of this consistently. 14  See BIS (2017), ‘The sterling ‘flash event’ of 7 October 2016’, January. See Joint Staff Report (2015), ‘The US Treasury Market on October 15, 2014’. 16 In this spirit, the FPC concluded following the sterling flash event that “such disruptions underscore the concern that liquidity in some markets may have become more fragile in recent years”. See Record of the Financial Policy Committee Meetings held on 23 and 29 November 2016. 15  6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Use of algorithms does not change the fundamental risks associated with trading in financial markets (e.g. market, counterparty and operational risks). But use of high-frequency trading algorithms does change their relative intensity and can materially increase the potential to build up significant intraday positions. This latter point is most obviously true for those bank and non-bank intermediaries that specialise in highfrequency trading. And though these firms should be expert in managing such risks, history shows this is not a given.