Innovations in Trading and Technology (The latest political attack on high-frequency trading is being prompted by Congressman Ed Markey, a Democrat from Massachusetts in the House of Representatives. In his letter to the current SEC chairman (see PDF, next page), Elisse Walter, and former chairman Mary Schapiro, dated January 18, Markey reminds them of the SEC’s powers to “limit or ban” high-frequency trading.
In stating his argument against HFT, Rep. Markey does not shy away from public record. In order of appearance, he references the European Central Bank, market commentators, a popular academic, an exchange official, and the US government (including the Brady Commission established by President Reagan), as well as the sentiment of ordinary investors. In just more than three pages, Markey expresses some pretty strong opinions about the magnitude of the problem, throwing around the term “volatility” throughout.
Basically, the Congressman argues that HFT is bad because it contributes to excessive market conditions, creates an unequal playing field for market participants, and promotes fear among ordinary investors, discouraging them from investing in US equity markets. While these arguments are not new, Markey ends his letter with a formal request to the SEC chairman asking for a response by February 7, 2013.
[Related: “HFT Checkmate: The Alpha in Order Types”]
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12 Comments to "Congressman Dials-Up Anti-HFT Pressure on the SEC":
Anonymous
25 January 2013
Just another pandering politician. This one wants Kerry's senate seat so he jumps in on a topic he knows nothing about.
Anonymous
28 January 2013
The most ridiculous uninformed letter I have ever seen on the topic.
wsteetpro
28 January 2013
I guess you both work for HFT shops. It's about time we address this cancer.
John Harris
28 January 2013
Have you confirmed that Markey actually wrote this letter? I ask because I am pretty sure it was actually written by the folks at The Onion. Either way, it's pretty funny. I hear all the time that the markets are rigged, but the people saying that are usually talking about Fed policy, bailouts of government-protected banks, and the ability of executives at really large banks to engage in fraud without fear of prosecution.
But I especially loved the part about the SEC's authority to ban activities that manipulate the level of the equity markets. That's hilarious! I can see the headline now: "SEC orders Federal Reserve to cease and desist from monetary policies designed to influence equity prices."
Anonymous
28 January 2013
I hate to be a stickler here but I don't know anyone who day trades their 401k. If he is using that as an umbrella to cover retirement accounts, then okay I suppose. It does make me wonder how much he really knows about the issues and is merely using the debate to create PR for himself. What a crazy thought on my part.
shamlet76
28 January 2013
you guys remind me of the hubris of lehman brothers before the crash. HFT cannot be sustained. there is no business purpose for theft.
Comments (149)
Anonymous
28 January 2013
I don't know enough to say it's theft but the genie is out of the bottle and we are not going back to an abacus. I think perhaps if politicians like Ed Markey didn't play a game of chicken with the American Public on the debt ceiling issue we would all have been better off, don't you?
shamlet76
28 January 2013
the US debt problem is DWARFED by the fraud in our financial markets. just how does the financial market expect to pay off $800 trillion in debt swaps? since world GDP is about $65 trilion, perhaps someone needs to look at their hold card. the US government debt is manageable compared to the debt and leverage in the financial market.
that topic has NO RELATION to the topic at hand.
Comments (149)
UpHillStill
28 January 2013
I don't see where retail investors are getting shafted more in the HFT regime than the old specialist system. If anything, they get cheaper execution than before-the specialists played all kinds of sneaky games as well. Larger institutional investors and speculators do get hurt however as they need to become HFT gamers as the old specialist or market maker would have given them a more consistent execution in the past.
As to whether HFT creates market instability, that's another question.
Anonymous
28 January 2013
To wsteetpro: since I believe the letter is ridiculous that makes me an employee of an HFT shop? It's people like you who will continue to turn these discussions into the WWE instead of a reasoned and intelligent debate. If you actually READ Congressman Markey's letter you would understand he pretty much equates EVERYTHING that is electronically traded to being HFT. I find it rather sad that we are going to sit back and let the politicians, grossly misinformed ones like Markey, regulate the markets into irrelevance. If that's what you wish wsteetpro then congrats you have your champion.
mortimer
28 January 2013
Anonymous: swtreetpro thinks that you are part of the evil HFT cabal.. you know, the one whose weekly meetings include dozens of russian phd programmers punching their keyboards and then cackling with joy when they make a stock move 10 cents. Don't try to deny it, we know you exist.... LOL!
Comments (11)
gbollenbacher
28 January 2013
This may be the last time Matt Simon writes as serious article on a political subject. Matt, be warned!
Comments (49)