The latest political attack on high-frequency trading is being prompted by Congressman Ed Markey, a Democrat from Massachusetts in the House of Representatives. In his letter to the current SEC chairman (see PDF, next page), Elisse Walter, and former chairman Mary Schapiro, dated January 18, Markey reminds them of the SEC’s powers to “limit or ban” high-frequency trading.
In stating his argument against HFT, Rep. Markey does not shy away from public record. In order of appearance, he references the European Central Bank, market commentators, a popular academic, an exchange official, and the US government (including the Brady Commission established by President Reagan), as well as the sentiment of ordinary investors. In just more than three pages, Markey expresses some pretty strong opinions about the magnitude of the problem, throwing around the term “volatility” throughout.
Basically, the Congressman argues that HFT is bad because it contributes to excessive market conditions, creates an unequal playing field for market participants, and promotes fear among ordinary investors, discouraging them from investing in US equity markets. While these arguments are not new, Markey ends his letter with a formal request to the SEC chairman asking for a response by February 7, 2013.
[Related: “HFT Checkmate: The Alpha in Order Types”]