Stiglitz off SEC panel on high-frequency trading
Vocal critic of high frequency trading (HFT) Joseph Stiglitz will not be on an influential panel looking at US equity markets.
The Securities and Exchange Commission (SEC) group will examine a number of key issues including HFT and dark pools. The omission of the Nobel laureate was reported by Bloomberg, which also said IEX Corp chief executive officer Brad Katsuyama, another opponent of HFT, will be on the panel.
In June, SEC boss Mary Jo White called for an investigation into how HFT could potentially disrupt equity markets. She asked for moves to increase disclosure on trading volumes and speed up the availability of data in order to improve market stability.
HFT and dark pools have been top of regulators’ priorities since the release of Michael Lewis’s book Flash Boys last year, although the SEC has been looking at the impact on markets since the flash crash of 2010. Lewis says markets are “rigged” by high frequency traders and describes it as “bigger than a scam”.
High frequency trading accounts for more than 50 per cent of trading volumes in the US. It accounts for between 24 and 43 per cent of activity on European equity markets by value and up to 49 per cent by volume, according to the European Securities and Markets Authority.
In April, Stiglitz argued that HFT makes markets less efficient and does not improve price discovery. “HFT discourages the acquisition of information which would make the market more informative in a relevant sense,” he said, adding that the practice leads to the wrong sort of liquidity.
Stiglitz thinks HFT creates excessively volatile markets and while not banned, should at least be discouraged. “Less active markets can not only be safer markets, they can better serve the societal functions that they are intended to serve,” he said.
The panel will contain at least 15 members and although Stiglitz is absent, there is likely to be a mix of critics and advocates of HFT.