GO
Loading...

Are markets rigged? Asia experts weigh in on debate

High-frequency trading – three words that have had Wall Street in a tizz this week.

And the debate, sparked by a new book that claims the stock market is "rigged" by a group of high-frequency traders, stock exchanges and Wall Street firms, is being followed closely by the world's other major financial markets.

Read MoreWatch the fight that stopped trading at the NYSE

"I do think it [high-frequency trading] is a concern," said KC Chan, the Secretary for Financial Services and the Treasury, in Hong Kong. "I always feared that high-frequency trading provides liquidity that comes and goes very quickly."

"In order to protect the market we must understand how this works and have rules in place," he told CNBC.

High-frequency trading is the use of high speed data connections and super-fast computers to give traders an edge over competitors. Analysts say that while the system may help provide liquidity to markets, there are concerns about transparency.

"The positive argument for this [high-frequency trading] is more liquidity and generally more efficient markets," said Timothy Moe, chief Asia-Pacific equity strategist at Goldman Sachs.

"If there is a concern, it's that some of those participants have an advantage over others and that's reflected in persistent profits being extracted. That's where the debate gets trickier," he added.

A fiery CNBC exchange on high-speed trading and 'rigged' markets stopped some traders in their tracks on the floor of the New York Stock Exchange on Tuesday.

Read MoreMichael Lewis, 'Flash Boys,' and '60 Minutes'

In Hong Kong, one of Asia's biggest financial hubs, stamp duty has limited high-frequency trading.

"There are lots of problems with dark pools and high-frequency trading," Chan said. "It's not that Hong Kong doesn't welcome new technology but when we have new technology and trading platforms we have to understand what's good for the market. Can we get transparency?"

For now, the discussion surrounding high-frequency trading is likely to be a U.S.-focused one, said Moe at Goldman Sachs. "From my perspective it is a U.S.-centric issue rather than a broader global issue," he said. "In terms of the investors I speak with, it's not a top issue."

Axel Merk, president and chief investment officer at Merk Investments, said he did not believe high-frequency trading had allowed some traders to rig markets.

Read MoreHFT: A glossary of terms

"Clearly [author] Michael Lewis has hit a nerve otherwise we wouldn't be talking about it," he said referring to Lewis' new book "Flash Boys."

"I think the reason it has hit a nerve is that the market is not your friend. When you buy stocks someone else is trying to sell you a stock and guess what, he is not interested in your welfare he's interested in his own welfare," he added. "Does that mean the market is rigged? I don't think so."