Better Markets Calls on the CFTC to Act Now to Stop High Frequency Traders from Destabilizing US Markets, Draining the Wealth of Investors, and Destroying Investor Confidence
“In what is now the unregulated ‘Wild West’ of high speed computer trading, for-profit exchanges and their most powerful customers often find their self-interests opposite the best interests of the rest of the market. Short-term profits have been prioritized over the stability and fairness of the financial markets, which is destroying investor and public confidence. As we detailed in the comment letter we filed, the CFTC must act now, before the next inevitable computer driven market meltdown happens,” said Dennis Kelleher, President of Better Markets, Inc., an independent nonprofit organization that promotes the public interest in the financial markets.
“Importantly, rather than delaying regulation indefinitely by tinkering with a definition of HFT or high speed trading so broad as to be meaningless, the CFTC must focus now on trading strategies that are unmistakably HFT and those most highly likely to be disruptive. Registration and data gathering must start now as well. A comprehensive definition can come later, but the abusive, predatory conduct must be stopped,” Mr. Kelleher said.
As set out in the comment letter, the CFTC must also:
- Ensure that trading strategies which would be illegal if performed at human speeds are not allowed simply because they take place at sub-second speeds;
- Stipulate that all orders placed on registered platforms must be valid for at least one second;
- Mandate that ‘liquidity rebates’ paid by the exchanges to encourage volume are only granted to genuine liquidity providers, not HFTs who are liquidity takers and merely provide an illusion of liquidity; and
- Act to curtail the uncompetitive mechanisms like special order types and privileged data feeds by which HFTs are able to exploit other investors.
Better Markets is an independent, nonprofit, nonpartisan organization that promotes the public interest in financial reform in the domestic and global capital and commodity markets. Better Markets advocates for transparency, oversight, and accountability with the goal of a stronger, safer financial system that is less prone to crisis and failure, thereby eliminating or minimizing the need for more taxpayer funded bailouts.