Stiglitz blocked from SEC post

[Knowing]

"In the algorithms we trust"

http://www.bloomberg.com/news/2015-...c-panel-after-faulting-high-speed-trades.html

Joseph Stiglitz, the Nobel laureate economist who called for a tax on high-frequency trading, has been blocked from a government panel that will advise regulators on issues facing U.S. equity markets, according to people familiar with the matter.
Stiglitz’s rejection shows the partisan infighting that has bogged down Securities and Exchange Commission Chair Mary Jo White’s plan to set up a panel of experts to advise the agency on topics ranging from rapid-fire stock trading to dark pools.
Republican Commissioner Daniel Gallagher opposed Stiglitz’s nomination in recent weeks as White sought to complete the list of participants, according to two people who asked to not be identified because the deliberations were private. Democratic Commissioner Luis Aguilar had pushed for Stiglitz, who has said high-frequency trading isn’t good for financial markets and should be curbed, possibly through a tax.

 

[Jhhnn]

"In the algorithms we trust"

http://www.bloomberg.com/news/2015-...c-panel-after-faulting-high-speed-trades.html

Wall St insiders rejoice!

 

[PokerGuy]

Yeah, more taxes, that always fixes everything

 

[Pulsar]

Yeah, more taxes, that always fixes everything

On high speed trading, it does. They are dealing in microseconds. Stocks are supposed to represent you purchasing a company that you believe in. But they've morphed into a game for the big houses. Anything that returns stocks to long term investment vehicles and starts getting rid of this idiotic wall street phantom-money creation scheme that's going on world wide is a good thing.

 

[Brainonska511]

Yeah, more taxes, that always fixes everything

Blind adherence to dogma also fixes everything.

 

[PokerGuy]

Blind adherence to dogma also fixes everything.

Oh, the ironing, it's probably lost on you.

 

[Oyeve]

Wasnt he in Inglorious Basterds?

 

[PokerGuy]

On high speed trading, it does. They are dealing in microseconds. Stocks are supposed to represent you purchasing a company that you believe in.

Says who? That might have been the original purpose a hundred years ago, but who says that should be the one and only goal at this point?

But they've morphed into a game for the big houses. Anything that returns stocks to long term investment vehicles and starts getting rid of this idiotic wall street phantom-money creation scheme that's going on world wide is a good thing.

So you've defined a goal with no particular supporting reasoning, then say "anything" that gets us to that goal is a good thing. Yeah, that will work out well, the end justifies the means always does.

 

[chucky2]

On high speed trading, it does. They are dealing in microseconds. Stocks are supposed to represent you purchasing a company that you believe in. But they've morphed into a game for the big houses. Anything that returns stocks to long term investment vehicles and starts getting rid of this idiotic wall street phantom-money creation scheme that's going on world wide is a good thing.

You don't even need to be a big house to do that...4M start to finish or so can get your idea implemented. Good luck getting Wall Street cleaned up, they control pretty much everything, I doubt they'll allow themselves to be truly inhibited.

 

[shira]

Says who? That might have been the original purpose a hundred years ago, but who says that should be the one and only goal at this point?



So you've defined a goal with no particular supporting reasoning, then say "anything" that gets us to that goal is a good thing. Yeah, that will work out well, the end justifies the means always does.

Rather than simply oppose taxes intended as a disincentive to high-frequency trading, shouldn't you really be addressing Stiglitz's contention that high-frequency trading is "bad for financial markets?"

That contention may or may not be true, but it's certainly worth investigating, isn't it? Here's the paragraph from wikipedia on the subject:

Various studies have reported that high-frequency trading reduces volatility and does not pose a systemic risk, and lowers transaction costs for retail investors, without impacting long term investors. However, high-frequency trading has been the subject of intense public focus and debate since the May 6, 2010 Flash Crash. At least one Nobel Prize–winning economist, Michael Spence, believes that HFT should be banned. Researchers in New Zealand and Canada have found that “the presence of high frequency trading has significantly mitigated the frequency and severity of end-of-day price dislocation, counter to recent concerns expressed in the media.”

In their joint report on the 2010 Flash Crash, the Securities Exchange Commission and the Commodity Futures Trading Commission stated that "market makers and other liquidity providers widened their quote spreads, others reduced offered liquidity, and a significant number withdrew completely from the markets" during the flash crash.

Politicians, regulators, scholars, journalists and market participants have all raised concerns on both sides of the Atlantic. and this has led to discussion of whether high-frequency market makers should be subject to various kinds of regulations.

In a September 22, 2010 speech, SEC chairperson Mary Schapiro signaled that US authorities were considering the introduction of regulations targeted at HFT. She said, "...high frequency trading firms have a tremendous capacity to affect the stability and integrity of the equity markets. Currently, however, high frequency trading firms are subject to very little in the way of obligations either to protect that stability by promoting reasonable price continuity in tough times, or to refrain from exacerbating price volatility." She proposed regulation that would require high-frequency traders to stay active in volatile markets. Other regulators, including current U.S. Securities and Exchange Commission Chair Mary Jo White, have pushed back against claims that high-frequency traders have an inherent benefit in the markets. Associate Director of the U.S. Securities and Exchange Commission Office of Analytics and Research Gregg Berman has suggested that the current debate over HFT lacks perspective. Speaking to the North American Trading Architecture Summit in April 2014, Berman argued, "It's about much more than quotes and cancels, despite the fixation exclusively placed on this topic by media and outspoken pundits. I worry that today's debate is too narrowly focused and myopic. As they say, it takes two to tango. There are things to change, certainly, but you must look at both sides of the question.”

The Chicago Federal Reserve letter of October 2012, titled "How to keep markets safe in an era of high-speed trading", reports on the results of a survey of several dozen financial industry professionals including traders, brokers, and exchanges. It found that

• risk controls were poorer in high-frequency trading, because of competitive time pressure to execute trades without the more extensive safety checks normally used in slower trades.
• "some firms do not have stringent processes for the development, testing, and deployment of code used in their trading algorithms."
• "out-of control algorithms were more common than anticipated prior to the study and that there were no clear patterns as to their cause. Two of the four clearing BDs/FCMs, two-thirds of proprietary trading firms, and every exchange interviewed had experienced one or more errant algorithms."

The letter recommended new controls on high-frequency trading, including:

• Limits on the number of orders that can be sent to an exchange within a specified period of time
• A “kill switch” that could stop trading at one or more levels
• Intraday position limits that set the maximum position a firm can take during one day
• Profit-and-loss limits that restrict the dollar value that can be lost.

The CFA Institute, a global association of investment professionals, has also advocated for reforms regarding high-frequency trading, including:

• Promoting robust internal risk management procedures and controls over the algorithms andstrategies employed by HFT firms
• Trading venues should disclose their fee structure to all market participants.
• Regulators should address market manipulation and other threats to the integrity of markets, regardless of the underlying mechanism and focus on risk management (pre- and post-trade risk controls), rather than try to intervene in the trading process or to restrict certain types of trading activities via fees or charges.

I would say that, based on the information in the above article, it would be a GOOD thing to include on the SEC panel a wide range of opinions about HFT and whether/how to regulate it. If Stiglitz's "tax HFT" position is the sole reason his nomination was blocked, that seems pretty small-minded and anti-public-interest.

 

[glenn1]

Anything that returns stocks to long term investment vehicles and starts getting rid of this idiotic wall street phantom-money creation scheme that's going on world wide is a good thing.

IOW, it's the same kind of Keynesian stimulus that Eskimospy and likely you would wholeheartedly advocate for if done by the Treasury or Fed.