But it's clear from Kaufman's remarks that he's keeping the pressure on the SEC to carry out a much broader review of rapid technological developments that have transformed trading and led to computer-driven millisecond speeds.
"I'm hopeful that last week's action was a true beginning," Sen. Kaufman said. "Banning flash orders is only a small—though significant—step in the review of recent market developments," stated Kaufman in the speech.
In late August, Kaufman sent a letter to SEC Chairman Mary Schapiro demanding a comprehensive independent "zero-based regulatory review" of a broad range of market structure issues. Kaufman said he is now pleased that the SEC was taking the review seriously. Schapiro and other SEC officials have indicated the Commission is reviewing these matters. (In her response to Kaufman, Schapiro indicated that the SEC is looking at Regulation ATS threshold levels, direct market access, high frequency trading and colocation).
Kaufman is concerned that the SEC has approved a number of innovations such as dark pools, high frequency trading and collocation, in a piecemeal manner. Specifically, he cited the rise of high frequency trading — a phenomenon, which has been building for many years but allows buy and sell orders to trade in milliseconds. He also singled out the emergence of dark pools, "which permit confidential in growing volumes to take place away from the public eye. We now have some trading firms' computer servers enjoying the advantage of onsite location at an exchange, a practice known as co-location." Later on in the speech, Kaufman pointed out that when exchanges began to allow traders to place their computers on-site and to allow direct market access, the SEC did not require approval.
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