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Chris Whalen: True Perpetrators in Michael Lewis’ Tale of Wall Street Greed and Corruption Are Congress, SEC, FINRA, Major Exchanges

Posted by Larry Doyle on April 23, 2014 8:23 AM |

Today I am pleased to elevate author and investment banker Chris Whalen into the highest echelon of the Sense on Cents Hall of Fame.

Whalen distinguishes himself as he properly frames the ongoing debate surrounding the scandalous practices within high frequency trading in a recent commentary that ran at Zero Hedge entitled, In “Flash Boys” Michael Lewis Misses the Point — Deliberately.

Let’s navigate as Whalen further exposes how our public officials and regulators charged with protecting the public interest are really “in bed with Wall Street.”

Whalen outlines,

All of the strategies used in HFT are not only legal, but they are the result of extensive rule making and public hearings by Congress, the Securities and Exchange Commission, FINRA and the major exchanges. So while Lewis is right to say that these strategies “screw” retail customers in a practical sense, the fact is that the activity has been entirely blessed by Congress, regulators and the major exchanges . . . structural duplicity is programmed into the system.

The question begs as to who was truly representing the public interest when systems and practices were developed and implemented that allowed for the legal ‘screwing’ of retail customers. Whalen continues and nails the real cause behind the symptomatic injustice that is embedded within high frequency trading activity:

. . .  the real scandal is that all of this has been entirely blessed by the SEC, FINRA and the major exchanges . . .   the crime of HFT is that Congress, the SEC and other regulators have allowed a handful of Wall Street firms to assemble a set of opaque market rules that few people understand.

Whalen trashes the presumption that Congress and our financial regulators actually protect the public interest. How and why do you think this ‘scandal’ and ‘crime’ happen? Because Congress and the regulators are getting paid to do so. The payola comes in the form of massive campaign contributions and lobbying funds and a spin through the revolving door to a high paying job in the industry. Those on the outside would define these practices as corruption. Those on the inside of these rackets would define them as ‘business as usual.’

Whalen concludes,

We should thank Michael Lewis for using his celebrity and considerable writing skills to draw attention to this issue of HFT, but “Flash Boys” incorrectly demonizes individual traders and firms.  Lewis “Puts a Face on HFT,” but in doing so misses the real point of the problem.

The true perpetrators in Michael Lewis’ tale of Wall Street greed and corruption are, in order of complicity, the US Congress, the SEC, FINRA and major exchanges.

I fully concur.

Can you say, “In Bed with Wall Street?”

Larry Doyle

Please order a hard copy or Kindle version of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy.

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The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

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