Wall Street wary of high-frequency trading firms

High-frequency trading firms are making Wall Street nervous, according to a Federal Reserve survey.

The Fed’s quarterly poll of senior credit officers at major securities dealers said the great majority of dealers who extend credit to high-frequency clients “indicated that they had increased the amount of resources and attention devoted to monitoring intraday exposures to such clients over the past three years.”

According to the survey, all but one dealer of the firms who increased oversight reported that they impose a maximum exposure limit or other types of limits for high-frequency firms.

Two-thirds of the officers in the survey said they calculate their exposure to high-frequency clients throughout the day, while one-third collect intraday margins.

The Fed survey show the firms are active in the stock market, Treasury market, spot and futures foreign exchange markets and equity futures markets.

In the Treasury market, a minority of dealers complained that their ability to trade with customers has “deteriorated” as a result of high-frequency trading firms in the inter-dealer Treasury market.