Sense on Cents

Former SEC chairman Arthur Levitt writes an editorial in today’s Wall Street Journal in defense of high frequency trading. Levitt pens, Don’t Set Speed Limits on Trading.

I welcome Levitt or any other individual highlighting the issues surrounding high frequency trading. Discussion and debate will hopefully bring a healthier marketplace for all. While Levitt provides the standard defense of high frequency trading in terms of providing liquidity, he offers brief remarks against the predatory nature of flash orders. Aside from that, though, Levitt largely skips the debate over the reality of front-running employed by certain aspects of high frequency trading.

I believe, however, the largest hole in Levitt’s editorial actually rests upon the shoulders of the Wall Street Journal itself. How so? Levitt is not only a former chair of the SEC, but he also happens to have a number of paid consulting and advisory roles. With whom? I’m glad you asked.

As Reuters reported this past June 2nd, Goldman Sachs Names ex-SEC Chief Levitt as Adviser:

Clinton-era Securities and Exchange Commission Chairman Arthur Levitt has signed on as an advisor to Goldman Sachs Group Inc., the Wall Street firm said on Tuesday.

The role, in which Levitt will provide Goldman with strategic advice in a number of areas, adds to other industry positions he has taken since leaving the SEC — the U.S. securities industry watchdog — in 2001.

Levitt, 78, also draws a paycheck from private equity group Carlyle and financial information provider Bloomberg.

“He will be a good source of advice,” said Lawrence White, an economics professor at New York University’s Stern School of Business. “He knows a lot of people in government, so it won’t hurt on the lobbying side. Who knows what they are paying him? But I’m sure they are getting their money’s worth.”

Levitt was the longest-serving chairman of the SEC, having led the commission starting in 1993, regulating the industry during the froth of the Internet boom.

Levitt also led the SEC as financier Bernard Madoff began his multibillion dollar fraud, prompting some congressmen to ask that he testify on the matter.

In addition to his role as a senior adviser to The Carlyle Group and Goldman, he also holds similar positions with Promontory Financial Group, a banking consultant, and Getco, a Chicago-based market maker.

Who is Getco? From the company website, we learn:

GETCO is a global electronic trading and technology firm focused on helping investors efficiently transfer risk. Our primary business, electronic market-making and liquidity provision, involves both buying and selling securities to provide two-sided markets on exchanges around the world.

Levitt is obviously entitled to have business relationships with whomever he wants, including a few of the largest high frequency trading entities such as Goldman Sachs and Getco.

The American public is also entitled to have this information provided by a news source supposedly as credible as the Wall Street Journal.

LD

This entry was posted on Tuesday, August 18th, 2009 at 11:12 AM and is filed under General, high frequency trading. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.