Naked access

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Also see: Sponsored Access

Naked access involves the practice of brokers giving high-frequency traders unfettered access to public markets. Some also refer to this practice as "unfiltered access."[1]

Some industry sources feared, however, that with high-frequency trading platforms firing off hundreds -- if not thousands -- of orders per second, a buy-side firm that has a sponsored-access arrangement with a broker could make a huge mistake.[2]

In October 2009, the Securities and Exchange Commission (SEC) said it was looking for ways to crack down on sponsored naked access, where brokerages that were approved to trade on an exchange rent their access to clients who are able to shave milliseconds from the time it takes to access the markets. At the time, lawmakers were becoming increasingly concerned that market developments were creating an uneven playing field that favored sophisticated traders and investors.[3]

References

  1. Naked Access Bashed at Roundtable. Traders Magazine.
  2. Naked Access Attracts High-Frequency Traders, Gets Regulators’ Attention. Advanced Trading.
  3. SEC Seeks To Curb Naked Access, Expose Fast Trades. Yahoo! News.