Thursday, June 5, 2014

SEC takes on High Frequency Trading (HFT)

The good news is that Mary Jo White, head of the SEC, is apparently taking on the corrupt thievery of high frequency traders, whose methods of skimming billions out of stock market were so clearly dramatized by Michael Lewis's wonderful book "Flash Boys."  

She speaks very cautiously about the way the market is being conducted, but the bottom line is that she is looking at creating rules to make fundamental changes.

"Responding to concerns about high-frequency trading, White enlisted SEC staff to prepare rules to require high-speed traders to register as dealers with the SEC and to bring more of this trading population under the Financial Industry Regulatory Authority, a self-regulating organization.  These steps "should significantly strengthen regulatory oversight over active proprietary trading firms and the strategies they use," White said."

The SEC will look at ways to minimize the speed advantages of the HFT folks, and to take away the lack of transparency in the Too Big To Fail big banks' "Dark Pools" where trades are made out of sight of investors, and the investors must simply take the prices given to them coming out of the Dark Pools.

The SEC will also be looking to counter the market instability that is being created by High Frequency Trading computer programs, as witnessed by a "flash crashes" in the past, in which the market dives precipitously so fast that no humans can intervene to stop the computers from grinding out their protocols at lightning speeds.

Congratulations to Mary Jo White, the SEC, Michael Lewis, and the hero of his book, Brad Katsuyama. And to the investing public.