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CFTC Commissioner Bart Chilton on the trading glitch at Knight Capital and the risks of high-speed trades.
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Knight capital surging today as the company is secures a line of credit and the sum of its trading partners including TD Ameritrade and Scott trade resumed trading.
With the firm that was of course big -- was struggling of course.
-- was struggling to shore up its capital following an electronic trading glitch that cost the firm.
400 million dollars Charlotte -- religious target about whether they're gonna be able pay it back by selling off some of their assets over the weekend -- Alan a first on Fox Business interview.
CFTC commissioner Bart Chilton now last time -- on the show.
He spoke specifically about the need for new regulations for high speed traders or is he call them cheated traders.
-- your your your prophecy is extraordinary we're glad you shared it with us before it actually happened this was apparently cheated trade that's.
That's what got this this company into so much trouble.
Now are we gonna see this kind of trouble happening in other market movers besides.
The one that got hit.
Dave we sure as heck -- if we don't do something about it I mean.
We have as you guys have reported you personally have reported many times we really had a crisis of confidence in these markets to -- you look at.
The pair grind thing you look at Barclays -- look at MF global.
We've -- all of these dilemmas in the markets.
And yet the exchanges and these -- traders are just grab and money and try it doesn't make as much as they can.
I think people need to take a big step back take a deep breath.
Let's ensure that we know what's going on were these programs tested do we know how they're gonna operate -- go out parent.
People try to grab as much money as they can't I mean we're talking about millions of trades.
You know in just a few minutes they were losing Knight capital Dave was losing ten million dollars a minute.
Is that the type of markets we want -- that gonna bring you don't yet understand -- by making the statement that you're making right now.
You're basically telling -- -- -- me if I'm wrong.
That regulation.
Could have prevented this debacle is that -- -- saying.
Well I mean I don't know specifics of this -- right need to look at it it's a little bit out of our line -- that's the SEC but this type of cheated trading where you have so much going on so fast.
Of course you need better controls on -- you need to know what's going on there is no requirement in the futures world standard that these guys are even registered.
If we want to go look at their -- look at their books and records.
You know about just sort -- flip us the borrow and I mean there's no way that we even have the ability to get their books and records.
Let alone required that they test these programs before they get what.
Into the actual production environment the market we going to do a better job eleven.
Let me step back for second -- just ask overall.
Are what we see is is what -- capital dozens of market mover.
Are becoming outdated ultimately will it will firm white Knight capital in the other market.
Movers be be replaced by technology that would give us the traders a chance to operate without the -- Well that's what some people suggest day they if they think that everybody just needs are on high speed frequency -- trading program.
And I just don't think that's where I.
Hello talking about it she got out you know the folks out there most individual traders I don't think go -- -- that the cheated traded -- market about right and the most.
It -- individual traders don't trade millions of shares every every minute so for for those of us who don't.
Might we be able to operate without the market movers.
What you need you need some of these guys in the markets the problem is that there could be incentives for example they have these market maker program the exchanges.
And the -- traders get money whether or not they win or lose on the individual trade they make money just by being in the market.
And the exchanges love it because they get volume that get transaction volume.
All I'm saying -- take a step back let's make sure these things work.
Let's make sure that they're operating efficiently and effectively so that they provide the liquidity that actually helps the market instead of having these huge down -- They trait like I say a crisis of confidence.
And -- you -- take a step back which makes me think.
The specialist that a human who connects the traders at the you know the buyers and the sellers on the floor have been replaced.
With this high speed trading by taking a step back are you saying we shouldn't return to the man on the floors.
Nationalist model now I mean I'm not that I -- my cave man audits Sandra and it's not like technology bad -- -- -- -- like became mayor Richard yeah.
Thank you for that I'm in the the point is data that we need to be able to know.
What's going on with these markets that we need to ensure that the technology works and that we don't have these disasters where you lose ten million dollars a minute that's unacceptable and it's not good for consumers it's not good for markets and it's not good for our economy.
By the way you're you're looking in a guy who was hired both by George Bush and Tom -- -- -- a guy who understands the the political -- also what he says makes a difference -- great to have you on again thank you so much for being here appreciate thanks guys.
