TGIF on HFT

It’s Friday and for many of us in the financial industry, it could not come soon enough. This has been a highly emotion-charged week. Now, as we head into the weekend to spend time with friends or stand on the sidelines of children’s sporting events, we will undoubtedly face inquiries from those outside our industry about what happened. “Who were those two guys going at it on CNBC?” A natural reaction would be to get defensive in our responses, but before you do please consider a different tact.

Anyone who has tweeted, issued a press release, posted a blog or has had the courage to appear on television demonstrated their passion for our industry. Their willingness to expose themselves to criticism, both constructive and not, is rarely seen in other industries. So, I’ll take what happened – this over the alternative of working with sloths.

Yes, this may not have been our industry’s “prettiest” week, but nothing that contributes so much to our nation’s fabric and worth fighting for is “pretty” 24/7, 365. Capitalism and democracy have their share of moments when individuals who are passionate about issues worthy of being passionate about, will get swept up in emotional moments. These moments sometimes put into motion a series of other events. But these moments are just that – moments. They do not define the outcome; they simply are part of the process. In some ways, this week was one of our industry’s finest. Anyone who has tweeted, issued a press release, posted a blog or has had the courage to appear on television demonstrated their passion for our industry. Their willingness to expose themselves to criticism, both constructive and not, is rarely seen in other industries. So, I’ll take what happened – this over the alternative of working with sloths.

The question we need ask ourselves is: “What do we do now?” For that answer, there are no shortages of experts, but there were two who offered input this week that is consistent with STA’s principles.

“Whatever policy solutions are pursued, they must both enhance the functionality of the market and restore public trust and confidence in Wall Street. Industry, specifically traders and exchanges, must focus on cooperation instead of clamoring for speed in a race to the bottom, which would only leave investors in the dust and force consumers to shoulder the burden of another financial crisis.”

 – Senator John McCain

“The approach by the SEC on these issues needs to be data driven and disciplined, to determine where high frequency trading fits into the range of market quality issues.”

 – Securities and Exchange Commission Chair Mary Jo White

The task now is to clearly define the problem(s) we’re trying to solve, propose solutions, have vigorous debate and build consensus based on data. It’s in everybody’s interests to have markets that serve their public purposes of capital formation and price discovery, and also are fair, transparent, liquid, efficient and stable. If we can agree on the problems and the goals, we can agree on solutions.

On a personal note, I am looking forward to watching CBS this Sunday evening. The Country Music Awards will be on and assuming Garth Brooks and Taylor Swift do not sing any duets on HFT, next Monday will start a prettier week for our industry.