Monday, December 7, 2009

SEC Says To Investigate High-Frequency Trading, Goldman Sachs Guy Investigating Goldman Sachs?

Reuters reports today that the SEC will seek public input on high-frequency trading, which accounts for 60% of U.S. stock trades. These are borkers using ultra fast computer algorithms to buy and sell shares and earn tiny spreads on market inefficiencies. Goldman Sachs is a master of these, reporting daily success in trading of something like 99%, which is virtually impossible.

The issue with this is that the new SEC COO is a 29-year (!), who was with Goldman Sachs (yet another GS person to assume a position of exteme power). Does anyone believe that Goldman Sachs will be investigated? As Bill Cara put it today, "Goldman Sachs is the only player in market history who can roll the dice 100 times and come up with sevens on 99. Oh, sorry, I forgot; the new chief prosecutor of the SEC is a 29-year old computer guy from Goldman Sachs."

Mary Schapiro said: "We will continue to use all tools at our disposal to aggressively pursue illegal market manipulation by high-frequency traders and others." "...will likely seek input on the various strategies used by high-frequency traders and any special trading advantages they may enjoy, including through co-location,"

Continues Reuters: "In co-location, brokers and trading firms rent space next to exchanges' trading engines, allowing them to put their computers under the same roof and shave valuable microseconds from the time it takes to make a trade. [...] The SEC, a big part of the Obama administration's financial reform plan, is trying to figure out what effect high-frequency trading has on long-term investors, and whether it makes markets more or less efficient, officials said last month".

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2 comments:

Stella said...

The SEC "controller" is not a 29-year old from GS. Nether is the SEC's "Chief Prosecutor". The person you're talking about was hired as the COO of the SEC's enforcement division. A COO is a senior(ish) role that combines admin and technology.

The Shocked Investor said...

Thank you Stella, COO it is. Because it is the "Enforcement" division as you state, that is probably why Bill Cara calls gim Chief Prosecutor (http://caracommunity.com/content/blog-december-7-2009-see-post-close-report). Of course His job title is not "chief prosecutor", it is just a play on the words with his actual title of chief op. officer of the "enforcement" division. The point of the post is whether someone believes he or the SEC will really investigate GS's high-frequency trading and come up with any meaningful measures or penalties...

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