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New Voices Enter the Market Structure Debate

22

June, 2011

Lately, we have come across some new voices in the high frequency trading debate.  As more and more people start to realize what is actually happening in the equity market on an intraday basis, they are getting frustrated and voicing their opinions on the blogs:

Joe DiNapoli, president of Coast Investment Software, Inc., has forty years of market trading experience, had this to say: Read Blog post here

“It was, without doubt, the illiquid conditions, apparent from late 2008, that caused the meltdown known as the Flash Crash in May of 2010. Blatantly unfair market conditions existwith the onset of high frequency trading computers and the total lack of accountability in our current market structure. Is it any wonder that liquidity-providing humans are staying away?  These conditions persist and more crushing and debilitating market days will come as sure as night follows day. The emerging markets may be at even more risk than those of more mature status as contagion can spread across the world in microseconds.”

Tom Groenfeldt, who writes about finance and technology for Forbes, wrote a blog post titled “High Frequency Traders – Cost reducers or CriminalsRead Blog post here

“Perplexing that even after years of algorithmic trading this is still an open question. Among finance professionals there is widespread agreement that it is an issue where politicians pretty much totally ignorant, but no less dangerous for their lack of knowledge.”

We applaud these new voices in the HFT debate and encourage others to grab the microphone.  But we still do not hear much from the proponents of HFT.  Well, we should say, we still do not hear anything different from the HFT proponents.  We continue to hear things like this that Mr. Groenfeldt highlighted in his post:

I havent read one single article in the media which had any value,said Stephane DiTullo, director of Deutsche Bank Securities. Theres no substance; [they depict]HFT stealing from mom and pop, disturbing the market. We are described as those villains, yet in the last 6 to 7 years, spreads have come down, cost of execution has come down, liquidity has improved.”

Jeez, again with the spread shrinking, commission lowering, adding liquidity argument.  Do these guys all read from the same playbook?  With all the money they spend on lobbyists, you would think they could at least dream up a few more reasons why they are not “villains”.

 

 

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