Xavier Rolet, chief executive officer (CEO) of LSE, made the comments at the side of a conference.
He said that the main purpose of HFT was not to increase liquidity but to allow trading to take place between increasingly fractured markets.
Speaking to the Financial Times, Mr Rolet said: âLiquidity provision is not its primary purpose. [The] design is fundamentally proprietary profit-driven, but is a required activity given regulators have decided to introduce competition and fragmentation.â
The encouragement of competition through new regulations such as the Markets in Financial Instrument Directive (more commonly known as MiFID) has also led traders to search for increasingly quicker ways of making trades, the CEO added.
His comments follow the recent publication of a report by the Securities and Exchange Commission into the âflash crashâ, which occurred on the Dow Jones Industrial Average earlier in the year.
According to the report, a single trade worth $4.1 billion triggered a near 1,000 point loss on the index over a matter of minutes.
By Jim Ottewill