Securities and Exchange Commission Plans to Ban Flash Trading

Bizjournals.com ^ | August 4, 2009

[khnyny]

The Securities and Exchange Commission has promised to ban a controversial trading practice offered by stock exchanges that include Lenexa-based BATS Exchange Inc.

Sen. Charles Schumer, D-N.Y., said in a release Tuesday that SEC Chairwoman Mary Schapiro told him in a personal phone call of the regulatory agency’s plans to ban flash trading, which momentarily lets certain traders know of stock orders before they’re released to the public market. BATS and Nasdaq have welcomed scrutiny of the practice. Last month, Schumer sent a letter to the SEC saying that it should ban flash trading or that he would introduce legislation to do so.

Later Tuesday, Schapiro released a statement confirming that she had “asked the staff for an approach that can be quickly implemented to eliminate the inequity that results from flash orders.”

A proposal to do so would have to be approved by the commission and opened to public comment, she said.

Opponents of flash trading say the practice harms market transparency.

[khnyny]

This is a follow up to the story posted here on FR yesterday re flashtrading, ie, Goldman Sachs.

[khnyny]

Here’s a link that does a pretty good job of describing the phenom:

http://online.wsj.com/article/SB124908601669298293.html

[Petronski]

Amazing that it was ever permitted.

[khnyny]

Yes, especially considering the general consumer hesitance to invest in this market. Transparency and a (somewhat) level playing field are key to real recovery.

Maybe it’s just the geek in me but, when you research this story, it is actually veeeerrrry interesting.

[Petronski]

It's as if GS was perpetrating the "penny-rounding" scheme from Office Space, and rather than threats about "federal pound them in the ass prison," the feds were saying "okily dokily."

Bizarre.