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.
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