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Liquidnet CEO: Limit High-Frequency Trading

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  • Description

    Liquidnet CEO Seth Merrin explains what's wrong with high-frequency trading.

  • Duration 4:15
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Anywhere.

But let's talk high frequency trading SEC launching an investigation.

And automatic Stubbs stock trading systems he has millions investors have gotten Al.

Out of the markets and some blame the unfair advantage that high frequency traders get now we're joined by Seth Marron.

Founder of liquid net -- -- dark pool that trades huge blocks for private clients so that people can't realize exactly.

What's moving around -- an asset you hit a high frequency trading I get the feeling but I want been told by market -- hate.

-- -- traders are helping unlock pricing transparency they provide liquidity in the market all good what's wrong with high frequency.

You know the problem is that it historically markets have been.

Consisted of not retail investors and institutional investors.

Now you have the majority of the volume of the market being high frequency trading which is completely divorcing the price of the stock from the underlying fundamentals.

They don't care about the underlying fundamentals and every day they go home flattening that don't have a position.

They're not investors.

And the problem is that the message flow that they send out and the frequency at which they tried to tread.

You know it's not really liquidity it's a lot of volume but it's not providing liquidity at a at a tenth of -- milliseconds.

For the the types of investors the institutions -- manage money on behalf of you and me who put money into mutual funds and pension funds.

I'm they're not benefiting from -- and when you have the majority of the of the volume in the market consisting of people who don't really care about the fundamentals of the stock.

In which mature than it's more of a commodity -- it's trading it's not -- I think now how much of the upside for above make -- thousands of trades per second and then not even execute most of them how much of it relies on the high frequency guy getting in line first before the new York stock exchanges other clients.

And front running the trade.

Unfortunate and I and I'm not all high -- -- -- is about some of that is scared but.

The majority I believe is that's going on today is about half into trading computers.

Listening out for supply demand announcement an institution when they go into buy -- sell stock.

They move the market because that the demand is just outstrips the supply.

Now -- about thousands of high frequency trading computers that listen for that and when they see it when -- here -- Then they go and they jump ahead of that which means that it's a zero sum game -- -- tax on all of our returns for all of us who invest in those mutual funds and pension.

Products and let's look admit you're that you're -- grinding your own acts here because you it's always compete with high frequency I mean what they undercuts your I mean there's got to be something you have -- -- -- tell us so we just -- -- just ban high frequency -- how to fix it.

I think you remember that never -- their lots of the for was for a minute.

But the problem is investor confidence you know we have we have a good market now hopefully the economy is coming back and fortunately the investor confidence is blown.

And why there's a common thread that underscores.

The flash crash and the night fiasco and the -- fiasco in the FaceBook fiasco it's all about upgrading systems for the massive amount of message traffic.

Not from investors but from the high -- traders and any time a massively visible fiasco like FaceBook or any of them.

Happens it destroys investor confidence around the world.

That's certainly been happening all too often you have one bullet point your -- you say exchanges -- to give investors the choice of whether to -- participate and high frequency flow they can actually.

Separate out having not particularly if I choose not in the unfortunately exchanges all over the world are now trying to beef up their systems to attract country could they -- to think if you say is bad for investors because it generates a tremendous amount of transactions not a big -- how protections make money.

The unfortunate thing is that it destroys again the overall integrity of the market itself.

So if you're going to attract high Pickens chairman have a separate pool where investors.

Can go and decide whether they want to interact with a high frequency.

We're not.

But today and not giving them choices is simply destroying investor confidence that's not right OK one last thing you do anything try to make this happen you lobbying anybody pitch at a proposal anywhere.

Well you know I've just gotten back from -- -- -- -- and we're trying to regulators all over the world.

And the regulators all -- the world appointee at the United States as what not to -- happen all right thank you so much for being with -- -- -- with liquid -- appreciate -- -- --

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