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Kudos to Sen. Edward Kaufman for asking securities regulators to take a comprehensive look at the impact of high-frequency trading and related super-fast trading strategies on the markets.
The Delaware senator is taking the right approach in asking the Securities and Exchange Commission to conduct a broad review of HFT, so-called flash orders and dark pools. It’s a much better approach than the more narrow one taken by Sen. Chuck Schumer, who last month focused solely on the impact of flash orders on the market.
While the issue of flash orders is important–it’s pretty clear that most HFT traders are not getting an early sneak peak at the order flow coming into regulated exchanges. But Schumer was quick to zero in on flash orders simply because that’s what a story in The New York Times mainly focused on.
Unfortunately, Schumer’s own letter to the SEC put too much focus on flash orders and made it sound like that was what HFT is all about. Kaufman, however, is helping to recalibrate the debate about HFT with his own letter to SEC Chairman Mary Schapiro.