To Be Honest…

The NYSE’s Larry Liebowitz wants the SEC to take a stand on high frequency trading, whose massive hot potato volumes is the reason the NYSE changed from being the Big Board to being a Server Farm. He is quoted yesterday in the Chicago Tribune’s business section as stating, “To be honest, to my knowledge there has been no proof shown that high frequency trading is detrimental. But the ominous silence of the regulators allows the fanning of the flames.”

I guess the NYSE does not understand why, when 70% of the trading done on their multi-tiered market is HFT, when one of the largest HFT shops is in fact their largest DMM (specialist-replacement) and when less than 8% of its revenues come from stock trading despite it being named a stock exchange, 70% of its former customers (long term investors and non-nano scalpers) feel the need to “fan the flames.”

Two years ago, HFT was the don’t-rock-the-boat secret that was taking billions from investors while Rome burned. Today, folks are getting educated by discoursing. Talking. The discoursing and talking is what is combating the billion-dollar lobbying effort by Exchanges and HFT to make new rules, and keep existing ones tilted in their favor. But Larry wants you all to stop talking. He wants you all to be quiet and to go back in time two years to the wonderful days of Flash Orders and Nefarious Data Feeds. Larry can’t hear himself think because there is just too much HFT talking, with no evidence.

So, we respectfully suggest that perhaps NYSE can’t hear itself think, not because of all of The Talking, but perhaps because of the Server Hum torturing even the majority of its own employees, who realize what the server-farm mentality of exchanges has done to our markets.

Finally, for Larry Liebowitz we again RE-offer just a drop of evidence of HFT’s damaging effects:
Daily Show HFT Piece from Larry Liebowitz’s brother, Jon Stewart. (Ok, maybe it is not evidence so much as humor and irony in the form of an anti-HFT piece by Liebowitz’s own brother!)

Yale University November 2010 HFT Study by X. Frank Zhang linking HFT to Volatility

UK Foresight Crashes and High Frequency Trading August 2011

Because we want him to be able to think again.

Edit: This morning we have spoken with a few industry participants, who have taken issue with our above post, as written above. After reading more of Mr. Liebowitz’s comments from that conference, outside of the Chicago Tribune article, and in the Reuters Article, and particularly this more balanced quotation:

“I think what it really takes is for the regulators to actually make a statement that says we’ve looked at this, we’ve taken everybody’s concerns into account, we actually looked at the numbers, and either we don’t see a problem, so everyone should stop waving their hands; second, we saw a problem with participants and we are disciplining them; or third, we think there are problems and we’re going to do some regulation.”

it is absolutely fair to include that additional comment from Mr. Liebowitz in our critical blog this morning. We do agree with it. Larry makes a great point. The overwhelmed SEC needs to stop listening to Political Interests intent on stopping Dodd Frank, and bring back some of their attention to our market structure issues.

In addition, while alluding to Mr. Liebowitz’s brother’s piece against HFT from 18 months ago makes for “literary license” and humor and interest, we in no way meant to hit below the belt, and offend familial relaltionships. I suppose small voices like ours resort to using colorful language at times, to highlight Very Important Issues, as those issues are crucial to the debate in our opinion, and we don’t have lobbyists and the political access that our opponents utilize.

And so we amend this post. We could just edit and the post, but if we err, it deserves to be addressed and not hidden. We amend the post to fairly include more context from Larry’s remarks, and in retrospect we wish we didn’t include the part about Jon Stewart’s piece.