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posted by LaminatorX on Wednesday April 30 2014, @01:04PM   Printer-friendly
from the The-House-Always-Wins dept.

US Securities and Exchange Commission Chair Mary Jo White told a US House of Representatives panel that she flatly rejected claims that retail investors are being fleeced by high-frequency traders who can use their speed to jump ahead with buy and sell orders that fetch better prices. "The markets are not rigged," says White. "The U.S. markets are the strongest and most reliable in the world." White's comments to the House Financial Services Committee mark the first time she has directly responded to allegations in Michael Lewis' new book "Flash Boys: A Wall Street Revolt" that high-speed traders are engaged in a form of front-running, in which the firms are able to quickly identify an investor's desire to buy a stock, rush to buy it first and then sell it back at a higher price. The SEC has been reviewing equity market structure issues, particularly following the May 6, 2010 flash crash incident when the Dow Jones Industrial Average sharply plunged before quickly rebounding. Although staff at SEC are considering whether to launch some pilot studies to test different regulatory proposals, there are no immediate plans to issue rules to crack down on high-speed trading or trading in unlit markets. "I want to be very clear that the market metrics suggest that the retail investor is very well-served by the current market structure."

 
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  • (Score: 4, Interesting) by wantkitteh on Wednesday April 30 2014, @02:22PM

    by wantkitteh (3362) on Wednesday April 30 2014, @02:22PM (#38116) Homepage Journal

    tl;dr version:

    "Stock market metagame got new rules, deal with it."

    If the metagame didn't interfere with the running of the stock market, I'd agree that this is a non-issue and the dinosaurs can go regulate themselves in a corner where no-one can see and deservedly so. However, the concern that many people have is that HFT is effectively a transaction rake and drains value from the stock market without actually participating in it's intended functions.

    I think the language used in reporting the possible issues with HFT has been largely incorrect with people using words like "rigged" and "cheating" and "unfair" when what they actually mean is that the principle function of the market has been demonstratably broken by a small by significant minority following centuries of technological advances and that a rethink of the rules might be a good idea to preserve the original purpose and function if deemed necessary.

    Important bit there - "if deemed necessary". It would seem that the people currently doing the deeming are awfully close to be people who did the breaking and will make a fortune as long as the status quo continues. I wouldn't be at all surprised if HFT caused the next Big Crash (TM) without warning and so quickly that no-one would know it had happened until it was all over.

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  • (Score: 2) by edIII on Thursday May 01 2014, @02:41AM

    by edIII (791) on Thursday May 01 2014, @02:41AM (#38328)

    It is a rake. I don't see it as any different than a poker room assessing 10%/$4max per hand.

    Except, I get free drinks, cute waitresses, $1 extra in the rake gives high hands and jackpots that routinely pay out.

    What do I get as a member of Main Street allowing this private rake against transactions that are supposed to benefit me at some point in the form of 401ks and pensions?

    How do those greedy corrupt bastards taking a rake make my life better again? How about anybody's except their own? Just how wealthy and well connected to do you have be to participate in the rake?

    I see a lot of people purportedly smart enough to explain this, but they never explain how it benefits anybody. There's a constant claim about how they provide a more stable price for a stock, but I remain unconvinced.

    There is no reason for HFT to even exist at all, and all stock trades regardless of source should be queued till the start of the hour, effectively ensuring that no single trade can be faster than 1 hour. Period. Run all the transactions, collect all the results, notify all the parties. Wait till the next hour when everybody can act again. It doesn't make a difference that we could create a nanosecond stock market. It's 1 hour, and that creates a level playing field all the way to the soccer mom doing a trade while baking apple pie.

    That's real equality. When the Ketterings and super elites can't effect a trade any faster than the janitors and housemaids that make their lives possible.

    If people think HFT is the only way the Stock Market is rigged against Main Street, they are incredibly naive. It's run by people that fundamentally don't believe in equality, and as evidenced by recent legislation, don't believe they should suffer consequences either. I know one instance should not reflect upon the entire stock market, but dear lord, how many instances are there? They even nailed Martha Fucking Stewart.

    Getting rid of HFT would be a nice start too unwinding all the corruption and theft going on against Main Street every single second.

    --
    Technically, lunchtime is at any moment. It's just a wave function.