Tags: Harris | high | frequency | trading

Former SEC Economist Harris: Lewis Right and Wrong on High-Frequency Trading

By    |   Friday, 04 April 2014 10:53 AM

Financial author Michael Lewis gets some things right and others wrong in his new book, "Flash Boys," that criticizes high-frequency trading, says Larry Harris, former chief economist of the Securities and Exchange Commission.

"While much criticism [of high-speed trading] is well-founded, the book does not provide a balanced view," he writes in a commentary for CNBC.

"It is not as bad as it seems. But where it is bad, the Securities and Exchange Commission must make important changes."

Editor's Note:
Secret Wall Street Calendar Uses Strange ‘Crash Alert System,’ Gets 18.79% Annual Returns

Retail and institutional investors face vastly lower trading costs thanks to electronic trading, says Harris, now a finance professor at the University of Southern California Marshall School of Business. "Numerous careful empirical studies show that trading is now cheaper than ever before due to the cost efficiencies of electronic systems."

But one problem is that exchanges have launched exclusive high-speed data feeds and special order types enabling high-frequency traders to profit from the trades of retail and institutional investors, he explains.

The exchanges then charge the high-speed traders big bucks to tap into these special data feeds.

"The SEC should ensure that all traders have equal access to data," Harris notes. "These high-speed data feeds . . . increase transaction costs for public investors."

Meanwhile, Charles Schwab CEO Walt Bettinger offers harsh criticism of high-frequency trading. "High-frequency traders are gaming the system, reaping billions in the process and undermining investor confidence in the fairness of the markets," he says in a statement.

"It's a growing cancer and needs to be addressed. If confidence erodes further, the fuel of our free-enterprise system, capital formation, is at risk."

Editor's Note: Secret Wall Street Calendar Uses Strange ‘Crash Alert System,’ Gets 18.79% Annual Returns

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Financial author Michael Lewis gets some things right and others wrong in his new book, "Flash Boys," that criticizes high-frequency trading, says Larry Harris, former chief economist of the Securities and Exchange Commission.
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2014-53-04
Friday, 04 April 2014 10:53 AM
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