Tags: Michael Bloomberg | high frequency | stock trading | investors

Michael Bloomberg: High-Frequency Trading Doesn't 'Rig' Stock Market

By    |   Friday, 02 May 2014 09:54 AM

Financial author Michael Lewis has created a major stir with his new book "Flash Boys," which claims that the stock market is rigged thanks to high-frequency trading.

Former New York City Mayor Michael Bloomberg, founder of the renowned financial information company named after him, begs to differ.

Overall, investors are "better served" by the plethora of exchanges and dark pools, because they enable investors to gain the best price possible when buying and selling, he told CNBC.

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

"The system isn't rigged," Bloomberg said.

"You don't have to trade there. You as an investor don't have to tell everybody what you want to do. You can sit there and say, 'I'm not going to tell them that I'm going to sell my stock."

You can choose whether you want to accept a bid for your stock, he said. "The other person doesn't have the right to know that," Bloomberg said.

He does have a problem with dark pools, however. "If you are making an offering, you should make it to everyone, and dark pools don't work that way."

Other experts also say that the dangers of high-frequency trading have been overstated.

"We reject any attempts to slow down trading," Arthur Levitt, former chairman of the Securities and Exchange Commission, and Burton Malkiel, chief investment officer of Wealthfront, wrote in The Wall Street Journal.

Some opponents of high-speed trading have proposed a trading tax to slow things down.

"In Europe, when trading taxes were implemented, trading volume and liquidity fell, and bid-asked spreads increased," the duo said.

"The answer is not to set a speed limit to slow down to the pace set by those unwilling or unable to compete. Instead, solutions should be directed toward fixing problems inherent in the system such as front-running."

As for Bloomberg, he defended the Wall Street community, despite the recent wave of insider trading convictions. While some financial industry workers broke the law, most "people that work on Wall Street are as good as people that work any place else," he said.

"If it wasn't for Wall Street, meaning commercial banks and investment banks and everything, we would not have an economy."

The average salary in the financial industry totals $70,000 a year, Bloomberg said. So Wall Street isn't just populated by a bunch of fat cats. "We're all in this together," he said.

Bloomberg said the Federal Reserve's massive easing program is responsible for the increase in income inequality. That's because the stimulus has fueled major gains in financial assets, which are primarily owned by the wealthy.

The S&P 500 has soared 181 percent from its March 2009 low.

"The issue here is, what do you do about it," Bloomberg said. Tearing down the rich isn't the answer, he said. History demonstrates that the Robin Hood approach — taking from the rich to give to the poor "doesn't work."

The solution is to create equal opportunities for all members of society, Bloomberg said.

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 has created a major stir with his new book Flash Boys, which claims that the stock market is rigged thanks to high-frequency trading.
Michael Bloomberg, high frequency, stock trading, investors
518
2014-54-02
Friday, 02 May 2014 09:54 AM
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