Representative Edward J. Markey (D-Mass) wrote to the US Securities & Exchange Commission (SEC) on Friday, urging them to use their existing powers to reign in High Frequency Trading (HFT).
According to the congressman, the SEC already has the necessary legislation in place to ban HFT, or at least to severely curtail the activity of HFT firms.
Markey's letter to SEC Chair Elisse Walter points to the Flash Crash, the BATS IPO and the Knight Capital trading error as evidence of the dangers of HFT and references various academic studies that point to HFT being a potential cause of volatilty in the markets. He also makes the case that "extremely well-financed, sophisticated trading firms can make full use of light-speed HFT algorithms, while the ordinary investor day-trading his 401k remains at more terrestrial speeds".
His letter goes on to cite a legislation package he helped to introduce in 1989, which give the SEC authority "to prohibit or limit practices which result in extraordinary levels of volatility". Although it was origially introduced to restrict program trading in the wake of the 1987 crash, the congressman argues that the wording of this legislation can also be used to restrict (or even outright ban) HFT.
Rep. Markey has reqested that the SEC formally responds by February 7th, 2013.
His letter can be seen here: http:/
knight capital trading, high frequency trading, flash crash, us securities & exchange commission, edward j. markey, stock market, economics, financial economics, business, financial markets, mathematical finance, u.s. securities and exchange commission, day trading, ed markey, chair, representative, congressman
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