Friday, May 7, 2010

High Frequency Trading Meltdown Shows FinReg's Toothlessness

The market fell nearly 1,000 points in twenty minutes yesterday. The "cause" was a broker entering in an extra zero, changing a million share trade to a billion. ZeroHedge's Tyler Durden doesn't buy it, citing high frequency trading (HFT) as the likely cause. CNBC said computers, not human error, caused the meltdown.

The High Frequency Trading Leaders Forum 2010 meets three weeks from the day of the market meltdown, May 27 in New York City. The theme is:

"Innovating and Profiting from High-Frequency Trading in 2010 and Beyond"

Who plays the HFT game? If attendance at past sessions is an indication, it's a mix of storied Wall Street firms, large institutional investors, custom financial shops and private equity underwriters (PEU's). The list includes The Carlyle Group, Blackstone Group and BlackRock.

Oddly, the Federal Reserve Bank of New York sent representatives in the past. Did Tim Geithner attend the High Frequency Trading Leaders Forum? What does Geithner think about Durden's specific concerns? One can't tell from Tim's vacuous public testimony.

Also coming up:
High-Frequency Trading Happy Hour, June 8th, New York City

Financial reform does nothing to reign in high frequency trading and gives private equity a virtual free pass. Should President Obama sign financial reform that day, the HFT and PEU boys can raise a Remy Martin shot to remaining in the shadows.

Update: FINRA says widespread use of High-Speed Algorithmic Trading was the likely cause of market meltdown