Thomas Peterffy founded Interactive Brokers in the 1970s. He is credited with being a pioneer in electronic trading, and an authority who has looked at trading from many different perspectives, and who has adapted as well as consistently profited. Indeed, Interactive Brokers owns a high speed HFT market-making firm called Timber Hill that is certainly known to all in the industry space, specifically in the ETF and option space.
Peterffy has been speaking out against speed in the market place for the last two years. Beginning with the 2010 SEC Market Structure Roundtable in mid-2010, where he criticized our market structure and high speed trading, he has since continued expressing his worries over the direction of our markets. In January 2011 he shocked the industry by advocating that all stock exchanges hold orders for 100 milliseconds (1 tenth of a second). In September 2011 he criticized HFT firms who were not registered market makers from wreaking havoc and volatility in ETFs. And this month Mr. Peterffy again urges the market to slow down in this NPR story and interview.
Mr. Peterffy, an unabashed “trader”, joins seasoned and sage traders and investors like Mark Cuban, Leon Cooperman, Michael Price, and Charlie Munger who have been warning that our markets have lost their purpose, and need to be reined in.
Healthy secondary markets are ones that:
– Allocate capital and encourage new capital formation.
– Are fair for all participants with a single even playing field.
– Are efficient and liquid (low cost with minimum friction).
– Achieve price discovery (deep and diverse pools are what is needed here)
– Instill confidence in all participants.
The SEC and CFTC need to realize that focusing on any one of these attributes excessively, and especially at the expense of the others, can only end badly. How many experienced players need to tell them this before they come around and act?