SEC Chair On HFT: 'The Markets Are Not Rigged'

Hugh Pickens DOT Com writes "Reuters reports that U.S. Securities and Exchange Commission Chair Mary Jo White told a U.S. 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. The book alleges 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.'"

Comments

Not a surprise

[cHiphead]

Looks like she's bought and paid for.

It's insanity, we are watching real life crazy people.

Re:Not a surprise

[timeOday]

High-frequency traders are spending untold millions of dollars to lay new fiber and pay analysts to develop competing algorithms that are totally divorced from anything of value. I don't want my savings dumped into perfecting this stupid game, I want it fixed.

Either she's a fool or complicit

[Andover Chick]

Of course the markets are rigged. It has always been that way all the way back to the 1920s. Most often the regulators where former insiders themselves, in which case they were complicit in the buddy-buddy world of Wall Street. This woman, however, just seems to be an imbecile. [I'm a 30 year veteran of Wall St and have worked on the trading floors in most of the major firms.]

Re:Either she's a fool or complicit

[Anonymous Coward]

There's also no way SEC can make the claim, since until CAT ( http://catnmsplan.com/ ) shows up, there's really no data to verify whether markets are rigged or not in the way described in the Flash Boys book. A more sensible answer would have been ``we lack the means to verify claims of a rigged markets, but indications point towards minimal or no impact to the retail investor'' (at least that would have been the optimistic truth). Flat out saying that markets are not rigged is just a lie, since they can't even do a study they're claiming to have done.

Front running

[countach]

Either people are being front run, or they are not being front run. Can't the SEC grow a pair and actually say definitively whether people are being front run or not? I don't think the concept of front running is an obscure concept that is up for debate. Come on SEC, investigate and pass judgement. Don't give us these weasel words.

Not rocket science

[Anonymous Coward]

So, if the market's not rigged and HFT is a feature, what's wrong with introducing random delays of tens of milliseconds into their data streams? Robustness testing, don't ya know. Since there's no way to guarantee flawless links you need to stress the system to locate problems.

The likely outcome would be that the markets would continue to perform as expected while a number of HFT firms would go belly up. Who would miss them?

So...Why then

[Grey Geezer]

are trading houses spending hundreds of millions of dollars on high speed, fiber optic, trunk lines, in an effort to cut milliseconds from their transaction times? Give me a break puddin cake!