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Flash Trader at Work! |
High-Frequency Trading is a Blight on Markets. Tobin Tax Can Help.
A tax on financial transactions can calm the frenzy of speculation fuelled by computer-driven algorithms
By John Fullerton
The dark side of the world of algorithmic trading in financial markets has twice been in the spotlight this week. First was the release of Michael Lewis' explosive new book, Flash Boys: Cracking the Money Code, which highlights many worrying practices in a sector that accounts for about half of all trades on the New York and London Stock Exchanges. Second was the FBI's announcement on April 2 that it would begin a criminal investigation into wrongdoing in the sector.
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| Active Organized Protesters - #occupyfairmarkets |
During 18 years with JP Morgan and for more than a decade since, I have watched and participated in the inexorable transformation of the markets, enabled by advances in technology. Their primary role of raising capital, allocating resources efficiently and mitigating risk has been slowly but surely drowned out by a cacophony of frenetic speculation.
60 Minutes Report
The capital markets are no longer the means to serve the capital allocation needs of the real economy, but have become ends in themselves. That end is the "business" of speculation, which is way out of balance and therefore unhealthy for the real economy.
As initially designed and utilized, derivative contracts connected domestic capital markets into a more efficient, interconnected global market for the benefit of borrowers, investors and intermediaries alike.
HUGE FBI PROBE:
Expect much more in the months ahead
