Wednesday, August 5, 2009

Is Mary Schapiro Qualified to Chair The SEC?

CNBC, clearly understanding the significant implications of a proposed changes to high frequency trading rules brought SEC Chair Mary Schapiro on to get an idea of what she's thinking.

Please understand that I am by no means an expert on market trading practices and rules. However watching this interview it comes across as if our SEC chair understands less.


Tuesday, August 4, 2009

SEC May Ban Unethical Flash Trading

Up until recently certain companies had advanced access to the orders other investors made, ahead of the transaction. Today it looks like the SEC may be making a move to ban the practices.

By placing servers with special detection and fast trade programs on them next to the computers that run exchanges like the New York Stock Exchange, companies like Goldman Sachs could determine very quickly what orders were coming through the system.

Taking an advantage of a delay from when an order is entered by someone like me and when it hits the market, the company could read order and then go in and buy the equity themselves just in time to mark it up a very small amount to then sell it me for a guaranteed, albeit small profit.

This is one form of computerized flash trading. Very recently one company, Goldman Sachs accounted for about 48% of all trade volume on the market through these types of trades, and flash trading in general. The practice allowed the company, to rack up billions in profits that many in the market feel are unethical and against the general principals of free market exchange in that it grants specific players an unfair advantage.

Read More Here
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