Regarding “Adapt or Die” …

I just wanted to get something off my chest this morning, before the trading day gets in full swing. There are many professionals in our industry who criticize anyone who has not embraced the new market structure, which requires co-location, trading engines and servers costing millions, and the knowledge and desire to program and  trade in a hyper short term manner. These critics assert that everyone outside their circle should Adapt to their ways  or Die.

1) It is a sad that our Regulators have allowed this group to gain the power that it has at the expense of long term investors.

2) If critics keep asserting that all market participants have to adapt to compete with the best armed, or choose to not play, then I think they are grossly misguided and lack perspective.

Be sure of this:  if all the non-adapting “weak links” in the market sell, or choose to “not play”,  then the market will be a disaster. The markets are here to serve everyone: investors, traders, and savers. We all need the markets; Social Security won’t cut it. That is why they must be molded to not just allow survival of the most powerful and best armed. They must protect its “weakest” participants.

If this does not happen soon, then our markets will continue to morph until they are like my sons’  Call of Duty games, which depict empty shelled-out buildings populated by well armed teenagers. The markets will be crushed. Capital formation will be crushed. Economic growth will be crushed.

One last point: if the Game evolves so that our markets are really like Call of Duty, then I promise it won’t be fun. Even among the HFT warriors, one or two firms will win. And they are very large firms, too.