Home » Market Structure » To Regulate Rapid Traders, S.E.C. Turns to One of Them

To Regulate Rapid Traders, S.E.C. Turns to One of Them

Popper and Protess, NYT, To Regulate Rapid Traders, S.E.C. Turns to One of Them, here. I’ve seen this movie before. I’m thinking we got a setup here, it’s a Yojimbo  situation w Manoj Narang as the ronin Sanjuro.

Team HFT Public Relations  you really don’t want to go down this “no cure for fools” path, it will not end well.  You keep allowing the stakes to be raised on a relatively mundane  multi year technology development process labelled HFT. We’re gonna witness a thousand dopey opinions bloom as a result of this sort of story framing. There are lots of other things people could be thinking about unrelated to HFT. There are guys who can grow human organs from baby fetus cells inside sheep; recently there was a Ptown prof. who had a book potentially proving the inconsistency of Peano Arithmetic; Mochizuki may have just taken out the ABC Conjecture using some kind of Inter-Universal Geometry, yet the parade of “rocket scientists” running ultra low latency Erlang trading systems and providing Xray vision for SEC staffers (unimaginable how that is going to go wrong) continues to stay in the spotlight. It is not that hard to get out the spotlight, look at one of the masters, Justin Rattner, here.

Tradeworx, a 45-person firm based in New Jersey, will dispatch its experts to Washington this month to tutor regulators on a sophisticated computer program that will give the S.E.C. its first real-time window into the stock market — something firms like Tradeworx have had for years. The S.E.C. program, designed by Tradeworx, is set to go into operation at the end of this year.

The program, called “Midas” by the S.E.C., is part of a broader effort at the agency to monitor the proliferation of new technologies and to crack down on practices that have given sophisticated traders an advantage over ordinary investors. The agency recently hosted public meetings on computerized trading to examine some of the recent failures in the market, like the malfunction at Knight Capital that wreaked havoc on stock prices in August. Last week, the Nasdaq exchange had to cancel errant trades after a technical problem caused shares of Kraft to soar.

The S.E.C.’s rudimentary technology has hobbled its ability to untangle these events and police the automated trading firms. With the Tradeworx program, the agency will gain access to every bid to buy stocks and every offer to sell shares on each of the nation’s 13 public exchanges. The system, akin to an X-ray machine for the stock market, could enable regulators to detect whether trading firms are overwhelming the market’s plumbing when they rapidly submit and cancel orders.

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