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Senate Investigation of High Frequency Trading: Will We Learn Anything?

Posted by Larry Doyle on June 17, 2014 8:58 AM |

The United States Senate Permanent Subcommittee on Investigations is holding a hearing today to “examine conflicts of interest, investor loss of confidence, and high speed trading in U.S. stock markets.”

The hearing will focus on two specific conflicts of interest: payments by wholesale broker-dealers to retail brokers for their customer orders, known as “payment for order flow;” and “maker-taker” rebates or fees that, depending on the circumstances, exchanges either pay or charge to brokers for executing trades on their platforms.

While I hope that some meaningful discussion might expose some of the crony, if not corrupt, practices within our markets, if past is prologue I am prepared to be underwhelmed. Why so?

The topics on the agenda are certainly worthy, but how aggressive will the committee be in probing these practices? Even more importantly, in addressing these conflicts, how aggressive will the committee be in exposing those charged with protecting the public interest, those being the regulators themselves, whose mandate is to protect investors?

In my opinion, the points highlighted above are the mere side effects of the real conflict of interest that should be on trial today. What are the three components of the conflict of interest that operate on Wall Street?

1. Self-regulation –> the Financial Industry Regulatory Authority (FINRA).

2. Regulatory capture/corruption –> the deeply embedded culture within the SEC.

3. Political payoffs –> the manner in which political sycophants feed at the Wall Street trough.

If we held a conflict of interest hearing, then perhaps we could pull back the blanket and expose all the players and practices ongoing in the Wall Street bed.

Many might think that the hearing I want is too much to ask for. That said, I would be willing to bet that my proposed hearing would attract a lot more attention and support than what we will hear today.

What do you think?

For those interested, today’s hearing will be webcast on the subcommittee’s website.

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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  • Peter Scannell

    “Advancements in technology have presented the industry with the greatest potential for democratization of market access, fairness and objectivity in order handling, and the ability to supervise and surveil markets. But we use the word potential very specifically – as we believe that this potential has not been fully realized.”

    Mr. Katsuyama testimony was exceptional in many regards, but what resonated with me most was his measured restraint. Throwing the baby out with bath water certainly could have been profitable for his newly created exchange, but his desire to be part of the solution rather than exacerbate the problem speaks volumes to his character and integrity.

    Now let the regulators continue their work.

  • John

    “A committee composed of our esteemed legislators do not have the capacity to understand the complexity of the issue. Hell I’m sure the issues even taxed Michael Lewis’ brain and he is light years ahead of the dopes in the senate.”

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