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The End of High Speed Trading? - Probably Not

posted by janrinok on Wednesday April 02 2014, @02:07AM   Printer-friendly
from the there-is-money-to-be-made dept.

carguy writes:

Under the headline, "The Wolf Hunters of Wall Street", The New York Times Magazine is running this review of a new book. It tells a long story that ends in the creation of IEX (Investors Exchange), a new stock exchange with the intent of bypassing the unfair advantages that co-located high-speed traders currently have. After a few weeks of operation near the end of 2013, their volume was larger than AMEX(!!)

Here's a quote from near the end of the book review:

IEX had made its point: That to function properly, a financial market didn't need to be rigged in someone's favor. It didn't need payment for order flow and co-location and all sorts of unfair advantages possessed by a small handful of traders. All it needed was for investors to take responsibility for understanding it, and then to seize its controls.

"The backbone of the market," Brad Katsuyama (President & Chief Executive Officer, IEX) says, "is investors coming together to trade." While the article is long, I enjoyed the story. I have no connection to this company, but here's their website.

 
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  • (Score: 1) by khallow on Wednesday April 02 2014, @02:01PM

    by khallow (3766) Subscriber Badge on Wednesday April 02 2014, @02:01PM (#24773) Journal

    IEX is still operating in the same market place as high frequency traders (HFT), millisecond transactions, dark pools, and automatic trade algorithms.

    While I approve of creating rival financial regulatory organizations, this would remain a problem because there really is only one space. Even the "national exchanges" are in this space even if they are subject to different regulation and rules. Nor would there be any advantage to attempting to segregate these markets, participants, and activities/algorithms. Especially since it doesn't deal with the government regional monopolies on regulation. There's no competitor to the SEC in the US.

    Instead, I think the diversification of markets into dark pools is one of the better financial innovations out there. I'm sure it'll bite us every so often, but dark pools are still a decent workaround for a few of the regulations imposed by the SEC and restrictions imposed by the national exchanges (such as time of day or week restrictions on trading stock or restrictions on computer trading at the very times when that trading is most needed - such as during market crashes).