The rise of high-frequency trading has eroded public confidence in equity markets, NYSE Euronext Chief Executive Officer Duncan Niederauer told lawmakers at a House Financial Services subcommittee hearing in Washington.
“The public has never been more disconnected,” Niederauer said Wednesday at a hearing called to examine ways to ensure “orderly, efficient, innovative and competitive markets.” “At the end of the day, the citizenry has lost trust and confidence in the underlying mechanism,” he said.
Lawmakers and regulators have been reviewing innovations such as high-frequency and algorithmic trading since a May 2010 market plunge temporarily erased $862 billion in U.S. equity value. The Securities and Exchange Commission implemented circuit breakers to halt trading when a company’s shares move 10 percent in five minutes, and SEC Chairman Mary Schapiro has pushed for a marketwide surveillance system.
“What used to be an investors’ market is now thought of as a traders’ market,” said Niederauer, 52, who runs the biggest U.S. stock exchange operator. “We convinced ourselves along the way that speed is synonymous with quality and in some cases it might be. In other cases, it clearly isn’t.”
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