Traders clashed over the
fragmentation and ultra high speed of today’s U.S. equities marketplace as one
charged that more traditional orders are being “gamed” but another
said that high-frequency traders are unfairly vilified.
The trading experts — summoned by
the Securities and Exchange Commission to peel back layers of today’s
complicated, mostly electronic marketplace — argued over what needs to be done
to restore confidence after the Dow Jones industrial average mysteriously
plunged some 700 points in minutes before sharply rebounding on the afternoon
of 6 May.
“It shook confidence in our
markets and it was avoidable,” said Richard Rosenblatt, who has executed
trades for institutional investors since the 1970s. “The clear culprit was
a commitment to high speeds whether it made sense or not.”
He added, “The flash crash was
embarrassing.”
The 6 May event confirmed some
long-held concerns over the marketplace’s stability.
The SEC and some policymakers are
questioning the rise of high-frequency traders, which use lightning-quick
algorithms to make markets and earn thin profits from tiny imbalances. Some
critics have said they put long-term and retail investors at a permanent
disadvantage.
The SEC is also probing the
fairness and stability of a marketplace where some 50 electronic trading venues
compete for ever faster and heavier order flow.
Other changes could come, such as
saddling high-frequency traders with commitments to trade and cracking down on
anonymous trading venues known as dark pools.
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