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SEC’s flash in the pan
Securities regulators will often settle for the proverbial low-hanging fruit — prosecuting easy cases that don’t make a big difference in the way Wall Street operates. But it does give the appearance they’re doing something.
And so it is with the Securities and Exchange Commission’s proposal to stamp out flash trading, an unsavory practice that has permitted some high-frequency trading desks to get a millisecond sneak peak at market trade orders.
Banning flash trading certainly makes sense, because there’s no reason that trading firms with lightning-fast, computer-driven buy and sell programs should get an advantage over the rest of the market.
But the furor over flash trading has always been something of a sideshow because it affects a minuscule percentage of the tens of millions of high-frequency stock trades made each day.
Algos gone wild
The many proponents of high-frequency trading keep saying there’s no reason to be concerned about a rogue algorithim sparking a 1987 market-style crash. HFT supporters keep saying show us a case where a rogue algo even caused a minor hiccup in the market.
Well, Bernard Donefer, a professor at CUNY’s Baruch College in New York City and a critic of highly-automated trading programs, says the world already has gotten a glimpse at the kind of mayhem a rogue or simply a misfiring algo can cause.
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The Wall
