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Former SEC Chairman Harvey Pitt on the SEC Roundtable on preventing errors during the trading day.
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Well I have been hot on this topic of high frequency trading for quite some time now.
Critics claim small investors are at a major disadvantage.
And in the wake of recent trading -- the Securities and Exchange Commission is set to hold a roundtable on Capitol Hill tomorrow.
To discuss the risks technology poses to the markets to stocks in -- that's.
Hey you remember the flash crash of may 2010.
-- at the Dow plunging nearly a thousand points in a matter of minutes.
And more recently over the summer one trading glitch cost a company called Knight capital 440 million dollars.
So does this all what does this mean for you and me and all the other small investors former SEC chairman Harvey Pitt joins me now.
Thanks for being with us today I really appreciate it.
Are you expecting much from this roundtable tomorrow.
Bomb expecting there to be spirited discussion but in terms of results.
I think there will be very little that comes out of it and this particular juncture.
The goal is really to educate the commissioners and staff.
And to start will focusing on some sensible ways in which -- some of these technology glitches can be happened.
-- educate the staff.
High frequency trading has been around for -- while it seems to need these folks should know everything about it why don't think.
I think there is clearly.
A lag time between when government becomes aware of technological.
Advances and when that starts to understand them fully.
I'm not justifying the timeframe that's gone on because we've had these problems as you pointed out.
For her over two years now.
But I think the government's.
Is world.
Advised to perceived.
Only one knows what it's actually doing rather than just jump into the.
-- good point.
I can see that and here's what they're gonna talk about tomorrow preventing errors in trading.
Responding to market crises once they've occurred so they're really gonna take this on with people -- inside the industry and people who are critics said the industry.
How should they go about.
Either regulating this or changing it or fixing it because you know as well as I do.
Investors have lost confidence in this market only 15% of Americans say they trust this market.
And I think this is one of those issues that goes to the heart of that.
I think they have.
To find out what.
-- simplest -- most direct.
Wages to get to the heart of these problems we cannot have these technological.
Glitches those -- seen.
It's critical that the government prevent people.
From unleashing technological.
Programs that haven't been fully tested and that aren't protective of the public and trust.
Well dad.
There's something called -- kill switch the people of talked about.
Is that fantasy I -- that that the Chicago fed is warned of the need for this that seem to me like one of those happy solutions and and reality may cause more problems than it.
And it solves.
I worry about anything called to kill switch because I'm worried about what it will actually -- I think there is something more direct -- government can do which -- put an end to so called spoofing.
That is the in putting of orders that are never intended to be executed.
That is something that is at the heart of a lot of the problems -- Citi.
Well you bring up a very good point this issue in spoofing.
These sort of fake trades.
That better never really intended to be pursued.
But isn't this the heart and soul of the business end of our exchanges isn't isn't that within the NIC is offering great prices for right now for these guys to seven -- spoofing trades to -- Think it is.
What the exchanges should be doing but I think we saw -- vast sea change.
Going back over a decade ago when we allow the exchanges to become for profit organizations.
At that point.
Cutting off trading volume and the like this something that most exchanges are not willing to risk.
What should happen next carving you know step 123.
-- -- think about serious solutions to this.
I think that the commission needs to suggest so the heart of -- Smart firms are doing.
To prevent their technology.
From creating unintended consequences.
There are a lot of Smart people out there who have mastered their own technology.
We are seeing the results of those who happens and I think that calls for government.
To understand.
What the Smart people are recommending -- them.
Well it gets under -- tomorrow Harvey -- and we will be following it thanks for coming on tonight appreciate your time.
