Europeans are already clamping down on speed traders. France and Italy have both implemented some version of a trading tax. The European Commission is debating a euro zone-wide transaction fee.
In the U.S., Bart Chilton, a commissioner of the CFTC, has discussed adding yet more pressure. At the Boca conference the evening after the meeting took place, sitting at a table on a pink veranda, he explained his recent concern. According to Chilton, the CFTC has uncovered some “curious activity” in the markets that is “deeply disturbing and may be against the law.” Chilton, who calls the high-frequency traders “cheetahs,” said the CFTC needs to rethink how it determines whether a firm is manipulating markets.
Under the CFTC’s manipulation standard, a firm has to have a large share of a particular market to be deemed big enough to engage in manipulative behavior. For example, a firm that owns 20 percent of a company’s stock might be able to manipulate it. Since they rarely hold a position longer than several seconds, speed traders might have at most 1 percent or 2 percent of a market, but due to the outsize influence of their speed, they can often affect prices just as much as those with bigger footprints—particularly when they engage in what Chilton refers to as “feeding frenzies,” when prices are volatile. “We may need to lower the bar in regard to cheetahs,” says Chilton. “The question is whether revising that standard might be a way for us to catch cheetahs manipulating the market.”
Recently the CFTC has deployed its own high-tech surveillance system, capable of viewing market activity in hundredths of a second, and also tracing trades back to the firms that execute them. This has led the CFTC to look into potential manipulation in the natural gas markets and review something called “wash trading,” where firms illegally trade with themselves to create the impression of activity that doesn’t really exist.
In May, Chilton proposed a .06¢ fee on futures and swaps trades. The tax is meant to calm the market and fund CFTC investigations. Democrats in Congress would go further. Iowa Senator Tom Harkin and Oregon Representative Peter DeFazio want a .03 percent tax on nearly every trade in nearly every market in the U.S.
As profits have shrunk, more HFT firms are resorting to something called momentum trading. Using methods similar to what Swanson helped pioneer 25 years ago, momentum traders sense the way the market is going and bet big. It can be lucrative, and it comes with enormous risks. Other HFTs are using sophisticated programs to analyze news wires and headlines to get their returns. A few are even scanning Twitter feeds, as evidenced by the sudden selloff that followed the Associated Press’s hacked Twitter account reporting explosions at the White House on April 23. In many ways, it was the best they could do.
Ok, the punch line. They suspect something fishy????
They know all too well what this is all about. If your sooo stupid you can't smell something rotten or just can't read then yes, you might be suspicious. As I said on another blog, the TSX will try revert to the old rules and claim they are listening to the market.
They knew what would happen when the last penny was sucked out of the market. They knew roughly how long it would take to do it and they knew it was illegal. IIROC and others are complicit in this theft. Mark my words, They could not be that stupid to not be able to see the outcome. This was deliberate.
As for taxing it, what a joke of its own. The HFTs are going silent and lurking in the darkness of what was once a vibrant trading pool. Anyone who is stupid enough to put any real money in there will have it stolen in the blink of an eye and that's why the market is dead. Retail doesn't have any money left. Big investors know what lurks below so they won't invest either.
The TSX is a fraud and nothing more. It's time for the people to call for an inquiry and arrests. If we don't get on immediately then it's time to throw out all the politicians. We can install non-professional politicians and set them to work investigating and prosecuting the old batch. If we don't start making stands against this continued insanity then we stand by and watch the politicos become so divorced from reality that they drag us down with the suction their vacuity creates.