Bart “Cheetah” Chilton Now Loves the Kitties!




CFTC Commissioner Bart Chilton has graced the pages of Themis Thoughts so many times in the last few years, we have lost count. We love his candor and honesty, and how he speaks in plain English; he is very affable, and it is hard to not like him.

In June 2011 he called out big HFTs for gaming the queue in the futures markets at a conference in Amsterdam. He called them “Cheetahs”.

In May 2012 he took aim at HFT’s and “Cheetah Traders” in the wake of the Facebook IPO Botch, and complained how they are not even registered, and that they scoop up “micro-dollars in milliseconds” by providing non-valuable fleeting liquidity – unless you really need to hedge soybeans for 5 seconds. He also questioned how it is possible that the third largest customer on the CME is an unregistered HFT in Prague!

Later in 2012 at a CFTC meeting, he was quite eloquent in his concern over how the industry is turning its head and pretending not to notice the illegal and manipulative wash-trading that is going on.

In September 2013 he added his own statement to the back of the CFTC Concept Release on Risk Controls and System Safeguards, in which he complained of the slow Rip Van Winkle pace of regulation, and especially of high frequency cheetah traders “who have, some I am convinced intentionally, contorted markets in a manipulative fashion.”

 He has called consistently for mandatory HFT registrations, increased oversight, and even increased fines – fines by the second!

 Then he left the CFTC. And in April of this year he joined a law firm with a Washington DC Lobbying presence – DLA Piper. And shortly thereafter he wrote a NYT Op-Ed titled No Need to Demonize High Frequency Trading, in which he claimed that 50% of trading on IEX’s investor-friendly exchange is HFT, and that HFT is not all bad. While his IEX figures were not accurate, and while his piece felt like an open-for-business advertisement, the crux of his Op-Ed points out that there are good HFTs who are valuable to the marketplace, and who themselves want more regulation and oversight.

Of course Chilton is right. There is nothing inherently wrong with some participants trading for the extreme short term in very fast ways, provided the platforms and mechanisms are all fair. We can attest that when we trade your orders, certainly we see our real time fills and know where we are getting executed. It is clear to even us that there are good short-term high-speed traders that we don’t mind having on the other side of our trades in the slightest.

The announcement yesterday that Modern Markets Initiative (MMI) – the HFT Lobby whose membership includes Global Trading Systems. Hudson River Trading, Quantlab, and Tower Research – hired DL Piper and Chilton to help them spread the word on the value of “good HFT” to the marketplace did not surprise us.

So then, why do we all feel uneasy about Chilton going to work as a lobbyist for HFTs?

I think our uneasiness has much less to do with high frequency trading, and much more to do with the regulatory revolving door being so prevalent over the last five to ten years in all industries, and specifically in ours. The examples are too numerous to count, but include FINRA, SEC and CFTC senior officials and commissioners. When we see how slowly any reform initiatives move, be it CAT or Pilot Programs, we all know deep down that the reason for the glacial pace of reform is due to “the revolving door”. You have people who used to try to lead reform efforts now fighting against them, and using their knowledge of the system and their relationships with those on the inside to influence it.

We would never begrudge someone the opportunity to go out and make a buck, especially someone who has toiled in a public service job for so long. But when a former top regulator is now getting paid by a very specific interest, then we can’t help but be skeptical as to whether he’ll stick to his principals on reform.

We part with a congratulatory note to Bart Chilton on the next phase of his career. We have always been fans of Bart Chilton, and found his voice refreshing. And we hope that the principals, issues, and activities he spoke about as a regulator are still worthy of his voice now; we hope that the signature on his paycheck does not change that.