A book bringing to light the risks of high-speed trading is long overdue, says one Toronto advisor.
“This is something that I’ve been aware since 2007 and we’ve been dealing with it at various firms that I’ve been at …,” says Arthur C. Salzer, CEO and CIO of Northland Wealth Management. “It’s good that a book has come out to bring attention to it, but this was an issue back in 2007-2008.”
In his book “Flash Boys: A Wall Street Revolt” – currently the No. 1 seller in the U.S. – financial author Michael Lewis calls the U.S. stock market “rigged,” accusing speed traders with advanced computers and network infrastructure of generating tens of billions of dollars under the radar by executing trades before other investors get their chance. Appearing on the U.S. current affairs TV show Sunday night, Lewis said the share price may only differ by a penny or even a fraction of a cent, but the sheer volume of shares are high.
Salzer couldn’t agree more, pointing out that these traders have an unfair advantage over other traders. He believes the practice has the power to breakdown market confidence.
“It really reduces the confidence in the marketplace and that’s something the regulators always want is confidence in the market,” he says. “It’s front-running and it’s an unfair advantage. It’s something that should be put a stop to, but that doesn’t seem to be the case.”
So, how do you stop these so-called speed traders from milking the system, so to speak? According to Salzer, it’s as simple as not allowing them to see the bids or offers prior to other participants; but is there incentive to do so? Not so much, he says. (continued)