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‘Flash Orders’ Ready to Burn Out, but High Frequency Trading Still Red Hot

Posted by Larry Doyle on August 5, 2009 11:48 AM |

The controversy surrounding the ‘flash order’ component of high frequency trading seems poised to burn out very soon. Senator Schumer, the SEC led by Mary Schapiro, and other market regulators may represent a discontinuation of flash orders as a victory. Make no mistake, though, this development would merely be a victorious battle in what should be a perpetual war to keep our markets free, fair, and totally transparent.

Sense on Cents has the following questions regarding flash orders and high frequency trading:

1. How were flash orders ever allowed to be utilized in the first place? Shouldn’t new trading methodologies, just like new financial products, be approved initially by the SEC and other market regulators prior to being utilized?

2. Isn’t the fact that flash orders have been utilized and will now seemingly be discontinued a further indictment of the lax regulatory procedures of the SEC? Who at the SEC is supposed to monitor these types of activities?

3. Given that flash orders will seemingly be discontinued, which individuals and firms/exchanges developed this practice? Why aren’t these names publicized? What other ‘tricks of the trade’ are these individuals and firms/exchanges concocting or practicing?

4. As Joe Saluzzi highlighted on my Sunday radio program (Review of Sense on Cents Interview with Joe Saluzzi on High Frequency Trading), there are many aspects of high frequency trading that need to be addressed. The war to make sure our markets are fair and free for all participants goes on. Let’s openly debate with total transparency the topic of rebates, co-location, predatory algorithms, and EVERY other aspect of high frequency trading.

I commend Joe Saluzzi for elevating the dialogue on high frequency trading. I repeat, the flash order battle is merely one beachhead in the perpetual war for free, fair, and open markets for all.

Let’s hear 4 minutes of wisdom from Joe Saluzzi himself on Bloomberg News:


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