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February 26, 2014

If HFT is here to stay it needs to be regulated

“Mark Cuban, the cigar-tugging media entrepreneur and owner of the Dallas Mavericks basketball team, was in the news last week, railing against the seeming failure of American regulators to get to grips with what Mr Cuban reckons is the Number one threat to US national security: high frequency market trading (HFT), of course.”

“Reuters had some choice quotes that had leaked out of a private speaking event organised by Cooley, an American law firm: ‘If I wanted to blow up this country, I don’t need bombs . . . It is going to happen so fast and it is going to be so undetectable that people will say it’s a fat finger . . . The next thing you know, there are flash crashes . . . and there is so much confusion that people don’t trust the markets and then they pull out.’”

“It is Mr Cuban’s contention that HFT, where computers loaded with algorithms trade in and out of financial markets at lightening speed, amounts to a parasitical practice – and that regulators such as the Securities and Exchange Commission should stop worrying about things like insider dealing and concentrate instead on the real threats to our collective financial wellbeing.”

“Now the Mavericks owner, who made his first fortune selling broadcast.com to Yahoo at the top of the dotcom frenzy 15 years ago, was rather talking his book here. Cooley was able to get Mr Cuban as a speaker because he’s an important client: the firm spent five years defending him against insider dealing charges levelled by the SEC. A jury cleared Mr Cuban of all allegations in October last year, but Mr Cuba’s ongoing contempt for the financial regulator is fabulously clear to anyone reading his online journal on the matter, blogmaverick.com.”

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Read full Financial Times article here.

 
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