Written DMandPenfold Algorithmic trading, also known as high frequency trading (HFT), quickly replacing human decision making, according to a panel of the British government, which warned that the law should be introduced regulations to protect the stock market.

Approximately one third of share transactions in the UK is carried out by computers fill orders based on complex algorithms, said the panel looking into a discussion paper released yesterday.

However, this proportion is significantly lower than that of the United States, where three-quarters of the equity deal is computer generated. Foresight panel, headed by Dame Clara Furse, the former CEO of the London Stock Exchange, argued that there are benefits and risks for serious algorithmic trading.

There was no direct evidence that the negotiation of computer itself increased volatility, he said, but in specific circumstances, it was possible for a series of events with unwanted interactions and the results to produce and cause enormous damage.