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* EU lawmakers want 0.5 second brake on high speed trade
* Kickbacks allowed if terms transparent
BRUSSELS, Sept 20 (Reuters) - European lawmakers want to slow down high-speed trading by half a second in an effort to dampen the kind of financial speculation blamed for the stock market's "flash crash" in May 2010.
One of the many financial practises which drew criticism in the aftermath of the financial crash, which briefly wiped out about $1 trillion in market value in a matter of minutes, was high-frequency trading, in which powerful computers are used to churn out thousands of trades in split seconds in order to profit from tiny price discrepancies.
Traders should be obligated to hold trades for at least 0.5 second, a position paper from the European Parliament on the second Markets in Financial Instruments Directive will say, parliamentary sources told Reuters.
And unlike the European Commission, which initiated the regulation shake-up, the European Parliament does not want to stop financial advisers from receiving commissions for selling financial products as long as the fee structure is clearly spelled out.
The paper will be put to a vote by the Parliament's economics committee next Wednesday and to the full chamber of over 700 deputies in the autumn.
Once the Parliament is finished they will have to negotiate their position with the European Commission and the EU's 27 governments.
The parliament's proposal is one of a raft of measures by its members to introduce radical financial reforms such as tougher bonus caps for those working in the financial sector.
It also comes as members prepare to negotiate a complete overhaul of financial supervision in the bloc, potentially handing full oversight over the bloc's 6,000 banks to the European Central Bank.
A mininum time for holding trades could take the edge off the industry's key selling point: the ability to make money from unexpected volatility in the market quickly.
The draft MiFID II law will require all traders who use algorithms -- a computerised set of trading instructions -- to provide appropriate liquidity and comply with rules that prevent them adding to volatility by darting in and out of markets.
The regulation is expected to take effect in 2014.