Hillary Clinton Proposes HFT Tax; “Hillarity Ensues”



I know many market structure people will read about Hillary Clinton coming out yesterday and advocating a trading tax on high frequency trading. Their reaction is likely to be one of concern, especially among modern market stakeholders and defenders. Themis wants to alleviate their concern, and your concern; you have nothing to fear! Allow us to explain…

If you were to only read this in the Bloomberg article,

In what her campaign is billing as an effort to put the interests of the investing public before those of high-frequency traders and “dark pools,” where securities are traded privately, Clinton will suggest that the Securities and Exchange Commission launch an overhaul of stock market rules to allow for equal access to markets, greater transparency and the minimization of conflicts of interest. 

Clinton’s targeting of high frequency trading may amount to her most meaningful punitive move against Wall Street so far. The proposal would also take aim at the practice of spoofing, the practice of rapidly submitting fake orders and then withdrawing them to try to move asset prices in a desired direction.

… and that alone, you might be tempted to think she will come down hard on Wall Street and HFT.

However, if your memory is sound, you will know better. You will know Clinton is just following the Washington Insider Sound Bite Playbook. You know she is just tapping into populist fears at the moment to shore up voter support ahead of her debate against Bernie Sanders; she just wants to look like a tough-on-Wall-Street “Warren-esque” populist leader.

Clinton is gambling that voters do not have any long term memory. However all any voter needs to do is “follow the money.”

First of all, Clinton has ex-CFTC Commissioner Gary Gensler working very hard for her campaign. Gensler is widely respected, and although he also has a “tough on Wall Street” image, he is friendly to HFT firms. He was especially friendly to those firms after Hillary Clinton’s friend, Chicago Mayor Rahm Emanuel, paid him a visit a few years back – flying down to see him on DRW’s Don Wilson’s private jet.(Emanuel’s Rare Political Reach Fuels Fundraising Machine) to advocate for certain positions around rulemaking. Specifically, HFT firms paid large sums of money to Rahm Emanuel’s campaign to persuade Gensler and the CFTC to ease commodities futures trading rules for firms like DRW, Jump, and Infinium.

Secondly, Hillary Clinton is also gambling that your memory is so short-term, that you won’t remember the Chicago fundraising dinner thrown for her earlier this summer by Chopper Trading founder Rajiv Fernando. Chopper Trading has since been sold to DRW trading, whose founder’s lobbying efforts we discussed in the last paragraph.

No.  Be certain. Be appeased. High-five yourselves, just like Clinton and Emanuel always do. There will be no trading tax imposed on high speed trading firms, especially one advocated for real by Clinton.

Money always trumps words, and words never trump actions.