Looks like the SEC is going to make a move here.What do you think? Addressing High Frequency Trading and Promoting Fairness Recently, a lot of lively debate has centered on high frequency trading, speed, and fairness. These have been important issues for some time. Algorithmic traders, which include high frequency trading firms and a large percentage of institutional trading, likely represent well over a majority of trading volume.[9] These traders use a variety of low-latency tools, including co-located servers in trading data facilities and direct data feeds from trading venues rather than the slower consolidated data feeds of the SIPs.[10] Much of the recent public focus has been on high frequency trading firms, but it is important to remember that many brokers use the same tools on behalf of their customers. The SEC should not roll back the technology clock or prohibit algorithmic trading, but we are assessing the extent to which specific elements of the computer-driven trading environment may be working against investors rather than for them. An area of particular focus is the use of aggressive, destabilizing trading strategies in vulnerable market conditions, when they could most seriously exacerbate price volatility.[11] While the volatility moderators already put in place impose outside limits on price moves,[12] even moves within those limits can be damaging. Instability arising during a broad market event may simultaneously affect hundreds or thousands of stocks, triggering many trading pauses and reopenings over a short period of time. To address this risk, I have directed the staff to develop a recommendation to the Commission for an anti-disruptive trading rule. Such a rule will need to be carefully tailored to apply to active proprietary traders in short time periods when liquidity is most vulnerable and the risk of price disruption caused by aggressive short-term trading strategies is highest. We also are focused on using our core regulatory tools of registration and firm oversight. I have asked the SEC staff to prepare two recommendations for the Commission: the first, a rule to clarify the status of unregistered active proprietary traders to subject them to our rules as dealers; and second, a rule eliminating an exception from FINRA membership requirements for dealers that trade in off-exchange venues. Dealer registration and FINRA membership should significantly strengthen regulatory oversight over active proprietary trading firms and the strategies they use. I have further instructed the staff to prepare recommendations for the Commission to improve firmsâ risk management of trading algorithms and to enhance regulatory oversight over their use. Given the overwhelming dominance of trading algorithms, it is time that our regulatory regime is updated to take better account of the risks when they are poorly designed or operated. Another important concern raised by algorithmic trading is fairness for investors. Do low-latency tools, even though they are available to investors through brokers, tend to advantage certain types of proprietary trading strategies that may detract from the interests of investors? Some of the research suggests this may be the case.[13] And a related fairness concern is the latency difference between the direct data feeds and the consolidated feeds. As initial steps to address these issues, we will continue to focus the efforts of the exchanges and FINRA in minimizing consolidated data latency. The exchanges and FINRA have an obligation to provide data to the SIPs in a way that is not unreasonably discriminatory. They are not allowed to transmit data to direct customers any sooner than they transmit data to the SIP, and the technology used for transmitting data to the SIP must be on a par with what is used for transmitting data to direct feeds. I am also asking the exchanges and FINRA to consider including a time stamp in the consolidated data feeds that indicates when a trading venue, for example, processed the display of an order or execution of a trade. With this information, users of the consolidated feeds would be able to better monitor the latency of those feeds and assess whether such feeds meet their trading and other requirements. And I am asking the exchanges to develop proposed rule changes to disclose how â and for what purpose â they are using data feeds. For example, which data feeds are used to execute and route orders? And which feeds are used to comply with regulatory requirements, such as trade-through rules? Brokers and investors could use the enhanced transparency to better assess the quality of an exchangeâs execution and routing services. Each of these measures target specific elements of todayâs technology-driven market that may work against, or at least not optimally for, the interests of investors and companies. We also are evaluating whether the evidence supports broader measures that would further advance those interests without creating unintended adverse consequences. We must consider, for example, whether the increasingly expensive search for speed has passed the point of diminishing returns. I am personally wary of prescriptive regulation that attempts to identify an optimal trading speed, but I am receptive to more flexible, competitive solutions that could be adopted by trading venues. These could include frequent batch auctions or other mechanisms designed to minimize speed advantages. They could also include affirmative or negative trading obligations for high-frequency trading firms that employ the fastest, most sophisticated trading tools. Such obligations would be analogous to the ones that historically applied to the proprietary traders with time and place advantages on manual trading floors. A key question is whether trading venues have sufficient opportunity and flexibility to innovate successfully with initiatives that seek to deemphasize speed as a key to trading success in order to further serve the interests of investors.[14] If not, we must reconsider the SEC rules and market practices that stand in the way. http://www.sec.gov/News/Speech/Detail/Speech/1370542004312
I'm sure the SEC will move swiftly to level the playing field since they have always acted to protect the interests of the regular guy and not the banking cartel.
--Another market structure concern is fragmentation. Order flow in exchange-listed equities is divided among many trading venues â 11 exchanges, more than 40 alternative trading systems, and more than 250 broker-dealers.[15] ---- yep..ive been saying this for mmmmm about a decade?the problem is kind of obvious.. ----The final market structure issue I want to highlight today is the quality of the equity markets for smaller companies. The number of domestic companies listed on U.S. exchanges now has dropped in half from the highs of more than 7,000 in the 1990s.[22] This decline has largely resulted from a reduction in the number of IPOs, particularly IPOs of smaller companies.--- yep...i've been saying same thing for a very very long time,but many (included some of ET members are still in denial). great sign of recovery and state of US economy in general(Good job Obama and the rest!) now...my question is still same-why some random guy,school dropout, from middle of nowhere in russia saying same exact things over and over again, pointing on those problems year after year and it takes decades for SEC to comprehend and acknowledge all those problems above? what i'm trying to say is that i'm seriously doubt their qualifications for their positions in gvt. and what concerns me the most-those dummies are in every level and every corner up to the very top in every sector of US gvt. here is a prime example: ---In the event of a Belarusian invasion of Ukraine, the 6th US Fleet will immediately be deployed to the shores of Belarus.----- http://globalvoicesonline.org/2014/06/05/jen-psaki-the-russian-internets-public-enemy-no-1/ no wonder that the businesses are running away from US and number of companies keep shrinking every month. cause no one wants to deal with an idiots.