Friends of ours probably know that we collaborate with, and receive ideas from, a few other thought leaders in the industry. One such leader is R.T. Leuchtkafer (RTL). We first connected with RTL before the Flash Crash, as he had written a comment letter to the SEC’s Concept Release on Equity Market Structure in early 2010 that was a stark contrast to the plethora of other industry comment letters, each claiming that “our equity market structure was working better than ever.” You can read RTL’s comment letter here.
RTL did not stop there. He has commented on several other regulatory filings. He has written editorials in the Financial Times, like this one on the SEC’s CAT gamble. He has written two guest chapters detailing the Flash Crash and its aftermath in our upcoming book, Broken Markets, which will be released in early June. Those chapters are the most thorough accounting of the facts of that day, as well as the key issues uncovered by those facts.
Today, however, we wish to share with you his painstaking assembling of thirty eight academic studies that paint a starkly different portrait of HFT than the pro-HFT conflicted studies you see so often cited by industry participants, who are intent on defending their status quo, and their ability to profit from a marketplace that is broken.
The collection is indeed thorough. Our intent is for you to download his “bibliography” of academic studies, peruse the ones that most peek your interest, and even cite them as you talk about market structure with your clients, be they external investors or even internal board members who want to better understand the landscape in which you trade every day.
We have cited several of these studies in some of our past notes to you. Without further ado,