High-Speed Traders Should Bear Cost of Oversight

Discussion in 'Wall St. News' started by RedDuke, May 9, 2011.

  1. From wsj.com:

    Fee Pitched for Fast Firms

    Senator: High-Speed Traders Should Bear Cost of Oversight
    By JACOB BUNGE

    Sen. Charles Schumer told regulators that sophisticated electronic traders should bear the cost of monitoring their dealings, with special fees assessed to firms that issue and then rapidly cancel securities orders.

    The New York Democrat said that such charges could defray the expense of building a new system to track in real time the orders that high-frequency traders pump into U.S. markets, a year after the "flash crash" sent stocks into a 20-minute tailspin.

    "In the aftermath of last year's Flash Crash, the need for more coordinated market surveillance has never been clearer," Mr. Schumer wrote in a letter to Securities and Exchange Chairman Mary Schapiro, a draft of which was reviewed by Dow Jones.

    The SEC desired such a "consolidated audit trail" even before the market plunge of May 6, 2010, but its high price tag—estimated by Ms. Schapiro in December at around $2 billion up front—and other priorities like implementing the Dodd-Frank financial law have held it up.

    Mr. Schumer said that construction could go faster if the SEC builds on existing functions of the Financial Industry Regulatory Authority, an industry-funded body already performing surveillance on securities markets like the New York Stock Exchange. Private trading platforms and brokers, alongside exchanges, could also shoulder audit-trail expenses, according to the senator.

    Charging algorithm-powered traders who "cancel a disproportionately high percentage of their trades," Mr. Schumer said, would both chip away at the tracking system's cost and discourage firms that are seen jamming exchanges with orders that are quickly discarded.

    Heavier fees would arrive as private electronic-trading groups, sensitive to even the smallest pricing shifts, already confront slimmer profits amid a slowdown in overall stock-trading volume. Research firm Tabb Group estimated that high-frequency trading now represents 53% of all turnover in U.S. stock markets, down from two-thirds a year ago.

    A spokesman for the SEC declined comment on Mr. Schumer's recommendations in advance of a formal agency response to the senator.
     
  2. olias

    olias

    On the face of it, this sounds like a pretty fair idea. Let's see how much traction this gets.
     
  3. sounds like a great idea. Took them a year to start having ideas like this, hopefully doesnt take another year to implement.
     
  4. Sen. Charles Schumer told regulators that sophisticated electronic traders should bear the cost of monitoring their dealings....

    --------------------------

    Awww.. Schumer...what a rightweous champion as the electronic traders lobby beats a path to his office door depositing money in his campaign coffer to "go easy". Why don't Schumer go back to his "banking" chair and fix banking? Just askng....
     
  5. Schumer?.....doesn't he "serve" from Alaska or Montana? :cool:
     
  6. someone here was calling them hft scum.

    looks like the senators read et
     
  7. I'm sure HiFi traders would find another loophole to capitalize on.
     
  8. Oh well .. back to trading off spreadsheets boys.

    Hope you all remember how to press shift-F9.

    Oh, and to the army of HF tech-dorks we employ .. your services are no longer required.
     
  9. rew

    rew

    Schumer's proposal seems fair to me. (I'm no fan of that senator but even a stopped clock is right twice a day.) To the degree that HFT requires special new regulatory infrastructure, obviously the HFT guys should be the ones paying for it.

    This won't end HFT. It just means that the HFT guys fork over a small fraction of their profits to their federal overseer.
     
    #10     Jul 18, 2011