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Darkness by Design: The Hidden Power in Global Capital Markets
An exposé of fragmented trading platforms, poor governance, and exploitative practices in today’s capital markets
Capital markets have undergone a dramatic transformation in the past two decades. Algorithmic high-speed supercomputing has replaced traditional floor trading and human market makers, while centralized exchanges that once ensured fairness and transparency have fragmented into a dizzying array of competing exchanges and trading platforms. Darkness by Design exposes the unseen perils of market fragmentation and “dark” markets, some of which are deliberately designed to enable the transfer of wealth from the weak to the powerful.
Walter Mattli traces the fall of the traditional exchange model of the NYSE, the world’s leading stock market in the twentieth century, showing how it has come to be supplanted by fragmented markets whose governance is frequently set up to allow unscrupulous operators to exploit conflicts of interest at the expense of an unsuspecting public. Market makers have few obligations, market surveillance is neglected or impossible, enforcement is ineffective, and new technologies are not necessarily used to improve oversight but to offer lucrative preferential market access to select clients in ways that are often hidden. Mattli argues that power politics is central in today’s fragmented markets. He sheds critical light on how the redistribution of power and influence has created new winners and losers in capital markets and lays the groundwork for sensible reforms to combat shady trading schemes and reclaim these markets for the long-term benefit of everyone.
Essential reading for anyone with money in the stock market, Darkness by Design challenges the conventional view of markets and reveals the troubling implications of unchecked market power for the health of the global economy and society as a whole.
Capital markets have undergone a dramatic transformation in the past two decades. Algorithmic high-speed supercomputing has replaced traditional floor trading and human market makers, while centralized exchanges that once ensured fairness and transparency have fragmented into a dizzying array of competing exchanges and trading platforms. Darkness by Design exposes the unseen perils of market fragmentation and “dark” markets, some of which are deliberately designed to enable the transfer of wealth from the weak to the powerful.
Walter Mattli traces the fall of the traditional exchange model of the NYSE, the world’s leading stock market in the twentieth century, showing how it has come to be supplanted by fragmented markets whose governance is frequently set up to allow unscrupulous operators to exploit conflicts of interest at the expense of an unsuspecting public. Market makers have few obligations, market surveillance is neglected or impossible, enforcement is ineffective, and new technologies are not necessarily used to improve oversight but to offer lucrative preferential market access to select clients in ways that are often hidden. Mattli argues that power politics is central in today’s fragmented markets. He sheds critical light on how the redistribution of power and influence has created new winners and losers in capital markets and lays the groundwork for sensible reforms to combat shady trading schemes and reclaim these markets for the long-term benefit of everyone.
Essential reading for anyone with money in the stock market, Darkness by Design challenges the conventional view of markets and reveals the troubling implications of unchecked market power for the health of the global economy and society as a whole.
250 pages, Kindle Edition
Published April 2, 2019
21 people are currently reading
261 people want to read
About the author
Walter Mattli
7 books7 followersWalter Mattli is professor of international political economy and a fellow of St. John’s College, University of Oxford. His books include The New Global Rulers: The Privatization of Regulation in the World Economy and The Politics of Global Regulation (both Princeton). He lives in Oxford, England.
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Displaying 1 - 7 of 7 reviews
June 16, 2021
This is mainly a book about the stock exchanges. Not something I expected.
1. In the good old days, traders (specialists) actually trade on the floor. Their job is to provide a smooth deal, provide liquidity sometimes to thinly traded stocks. As they are in the privileged position of knowing real time buying and selling information, they are tempted all the time to profit from that information. So they were tightly regulated with people literally looking over their shoulders when they perform the trade. Reputation is critical for long term success, and being caught cheating can ruin their career. When computers arrived, they made detailed trading information available and further improve compliance.
Then came the fragmentation of markets. Investment banks became so rich, they are bypassing the exchanges and sometimes offered to trade in house (dark pools). Those are not transparent but prone to predation from in-house traders who may act on the demand and supply information to enrich themselves. And they all cheat according to the author. So the exchanges are losing power and in turn become willing to bend over backwards to accommodate them.
The powerful investment banks invest him ultrafast cables so that they can act on any information faster ( buy when the price was in its original state before everyone buys,
driving up the price). They also do predatory trading against institutional investors (whales such as Buffett). They can do spoofing: make lots of buying in a trade, let the price goes up, then cancel the trade, then sell the stock after the artificial pump and dump. All in a few milliseconds. The other method is quote stuffing: putting tens of thousands of orders simultaneously across different exchanges, preventing updates of the prices and thus benefiting from the arbitrage. It’s very hard to catch these traders.
What to do?
1. Market transparency: force banks to disclose their dark pool transactions. Let researchers have access to data to figure out how the real market works (Healthy Market Research Institute in 2017).
2. Level the playing field. Slow. It. Down. Periodic auctions at every 100 milliseconds. Speed bumps to slow down everyone. Delay special private cables until information has been publicly disseminated. Tax high-speed traders beyond a certain number of cancellation.
3. Proper accountability: jail the black sheep.
4. Consolidation: to regain power fr high speed traders.
This should have been a very specialised book but it was interestingly written for the layman. Now I understand why they invest hundreds of millions to gain a few milliseconds!
1. In the good old days, traders (specialists) actually trade on the floor. Their job is to provide a smooth deal, provide liquidity sometimes to thinly traded stocks. As they are in the privileged position of knowing real time buying and selling information, they are tempted all the time to profit from that information. So they were tightly regulated with people literally looking over their shoulders when they perform the trade. Reputation is critical for long term success, and being caught cheating can ruin their career. When computers arrived, they made detailed trading information available and further improve compliance.
Then came the fragmentation of markets. Investment banks became so rich, they are bypassing the exchanges and sometimes offered to trade in house (dark pools). Those are not transparent but prone to predation from in-house traders who may act on the demand and supply information to enrich themselves. And they all cheat according to the author. So the exchanges are losing power and in turn become willing to bend over backwards to accommodate them.
The powerful investment banks invest him ultrafast cables so that they can act on any information faster ( buy when the price was in its original state before everyone buys,
driving up the price). They also do predatory trading against institutional investors (whales such as Buffett). They can do spoofing: make lots of buying in a trade, let the price goes up, then cancel the trade, then sell the stock after the artificial pump and dump. All in a few milliseconds. The other method is quote stuffing: putting tens of thousands of orders simultaneously across different exchanges, preventing updates of the prices and thus benefiting from the arbitrage. It’s very hard to catch these traders.
What to do?
1. Market transparency: force banks to disclose their dark pool transactions. Let researchers have access to data to figure out how the real market works (Healthy Market Research Institute in 2017).
2. Level the playing field. Slow. It. Down. Periodic auctions at every 100 milliseconds. Speed bumps to slow down everyone. Delay special private cables until information has been publicly disseminated. Tax high-speed traders beyond a certain number of cancellation.
3. Proper accountability: jail the black sheep.
4. Consolidation: to regain power fr high speed traders.
This should have been a very specialised book but it was interestingly written for the layman. Now I understand why they invest hundreds of millions to gain a few milliseconds!
August 8, 2019
(I wrote this review as a piece also considering Paul Collier's 'The Future of Capitalism'. Discussion of Mattli's book is in the second half of the review.)
The Oxford economist, Paul Collier, has felt the need to revitalise the revisionist cause with a book that takes its cue from Ricard Crosland’s opus But where the old Labourite had envisioned a future for socialism, his acolyte admits that what he is really looking forward to is a future for capitalism.
His new book asks us to accept that capitalism has done a remarkable job in creating wealth and raising the living standards of those lucky enough to live in its heartland countries. But it has gone wrong in recent times and is now dominated by a drive and an ethic which is bent on the rent-seeking activity, grabbing monopoly control of an asset, and milking it for all value that can be extracted. Collier regrets that image of a vampire squid, forcing its feeding tube down the throat of society to suck nutrition out the system, isn’t a half-way bad analogy for the way things have turned out.
But how do this happen? The myth of a golden age of ‘ethical’ capitalism is invoked in which firms worked hard to produce the goods and services which everyone needs, working happily with government to make sure the resources where available to educate, house and care for the health of their workforces, and generally get along with everyone. At some point a serpent appeared in this Garden of Eden and things have been going to hell in a handcart ever since.
Actually, there were two snakes involved – one named utilitarianism, and the other, human rights culture. The first worked to undermine the morality of communitarian capitalism by detaching rationality from our instinctive value systems. It ignored the role that the reward that came from winning the esteem of one’s fellow citizens played in cementing self-interested individuals together in ways that allowed them to function in coherent societies. It presumed that the pursuit of self-interest in a world where social good emerged as an accidental by-product was the real driving force towards progress.
Human rights culture added to the unhappiness that ensued by offering remedies which centred on the individual being empowered to take a stand against the impersonal forces unleashed by rational choice. Added together, the turn towards turbocharged individualism facilitated changes to the structures of the market and institutions of government which dragged down the ethical state and ethical firm, and simultaneously doing untold damaged to the ethical family and the individuals it produced. As people ceased to care about each other divisions opened up which changed the character of neighbourhoods and communities (the work of selfish immigrants here), separated cities and regions, wrecked capacity to provide basic housing, as well as undermining the social obligation to provide ‘rescue’ to people who genuinely merited it (refugees get a positive look-in on at this point).
With such an analysis of the reasons for our fall from grace Collier believes he can deduce a route to salvation. Utilitarianism and human rights culture are not intrinsic to capitalism. What has emerged in recent decades as an unwelcome intrusion can be exorcised by pushing back to get ethics and community back into the system. The second half of the book reads like an anthology of recent Fabian pamphlets dealing with issues like taxation policy, education and security in retirement which he thinks would get social democracy back on track and returning capitalism into the sort of tamed beast he imagines it once was.
The objection to Collier’s perspective is the standard one of how he managed to invert cause and effect, making what is in fact entirely epiphenomenal to social and economic developments the driving force of the moment in history. In short, capitalism did not become more selfish and individualistic because a particular set of ideologues came out on top at some point in time: on the contrary, the neo-utilitarianism of Friedman and Hayek and Rawlsian rights gained ascendency because the temporary convergence of the nation state and corporate capitalism had been unpicked by profound changes to the way markets had come to operate from the 1970s onwards.
Collier's account can be usefully contrasted with the exploration of the changes in the ways in which securities are traded in stock markets provided by Walter Mattli in his book, Darkness by Design. Looking at the trading floor of the NYSE at any date prior to 1970 is is quite possible to believe that, once upon a time, capitalists did things different and with a degree of honour in the way they conducted their businesses. Securities (stocks and shares) were traded in a transparent public market place, with brokers bound together in a mutual association which made underhand behaviour a severe reputational risk, not to mention costly.
The old ways did not last because utilitarians and human rights lawyers snuck up on the brokers to demand they change their values. It was rather the disembodied logic of capital accumulation which did the deed, asserting pressure for change because the old markets were running short on the liquidity needed to grow their markets. The cash that was needed was locked up in the big banks which had historically been barred from participating in the security exchanges. In the 1970s the barriers to their participation began to come down and, once admitted as member organisations, their sheer size and the vast resources they could draw on edged the small, traditional broker partnerships out the way.
So why couldn't they carry on with the same ethical standards that had been upheld by the specialist brokers who oversaw trade on the floor of the exchange? Mattli explains that they brought with them a pre-existing tradition of off-floor trading which made use of the large pools of clients already on their books as customers. Without having to pay scrupulous heed to the 'discovered' price of securities being traded in the open, the banks worked through 'dark pools' to manufacture deals which more directly served their interests. Markets thus became fragmented and devoid of the forms of transparent oversight which were supposed to keep them honest.
From there the whole sorry story of predatory financialised capitalism takes over. The quest of self -serving advantage through up the whole gamut of special or special order trading which moving deals out of the queues the old system had confined them to, with volumes of trade and price determining who got what. The rapacious appetite of the trader displaced investors who were looking for securities which could be expected to grow in value over longer periods of time. Prices were manipulated through quote stuffing strategies which worked to the advantage of the banks, but exacted a price from investors. The high-speed trading came along, which is a whole other story of predatory, asset-grabbing and milking altogether.
How can the utilitarian philosopher, or the jobbing human rights lawyer be blamed for any of this? Is it any event a predicament that can be remedied by Collier's mix of Fabian enthusiasm for 'pragmatic policies' and nostalgia for the time when we all lived in tight-knit communities in which people looked out for one another?
The appeal for more ethical behaviour recalls the admonishment of another great socialist, RH Tawney, who also rooted his work in an obligation of people to behave better towards one another. But Tawney had less illusion in the merit of the capitalist system than Collier. "You can peel an onion layer by layer, but you can't skin a live tiger claw by claw," he famously opined. Capitalism is a tiger and it will not be rendered passive and useful by bit-by-bit pragmatism. If it not to be permitted to skin us all it will need to be put in a cage and permanently subdued.
The Oxford economist, Paul Collier, has felt the need to revitalise the revisionist cause with a book that takes its cue from Ricard Crosland’s opus But where the old Labourite had envisioned a future for socialism, his acolyte admits that what he is really looking forward to is a future for capitalism.
His new book asks us to accept that capitalism has done a remarkable job in creating wealth and raising the living standards of those lucky enough to live in its heartland countries. But it has gone wrong in recent times and is now dominated by a drive and an ethic which is bent on the rent-seeking activity, grabbing monopoly control of an asset, and milking it for all value that can be extracted. Collier regrets that image of a vampire squid, forcing its feeding tube down the throat of society to suck nutrition out the system, isn’t a half-way bad analogy for the way things have turned out.
But how do this happen? The myth of a golden age of ‘ethical’ capitalism is invoked in which firms worked hard to produce the goods and services which everyone needs, working happily with government to make sure the resources where available to educate, house and care for the health of their workforces, and generally get along with everyone. At some point a serpent appeared in this Garden of Eden and things have been going to hell in a handcart ever since.
Actually, there were two snakes involved – one named utilitarianism, and the other, human rights culture. The first worked to undermine the morality of communitarian capitalism by detaching rationality from our instinctive value systems. It ignored the role that the reward that came from winning the esteem of one’s fellow citizens played in cementing self-interested individuals together in ways that allowed them to function in coherent societies. It presumed that the pursuit of self-interest in a world where social good emerged as an accidental by-product was the real driving force towards progress.
Human rights culture added to the unhappiness that ensued by offering remedies which centred on the individual being empowered to take a stand against the impersonal forces unleashed by rational choice. Added together, the turn towards turbocharged individualism facilitated changes to the structures of the market and institutions of government which dragged down the ethical state and ethical firm, and simultaneously doing untold damaged to the ethical family and the individuals it produced. As people ceased to care about each other divisions opened up which changed the character of neighbourhoods and communities (the work of selfish immigrants here), separated cities and regions, wrecked capacity to provide basic housing, as well as undermining the social obligation to provide ‘rescue’ to people who genuinely merited it (refugees get a positive look-in on at this point).
With such an analysis of the reasons for our fall from grace Collier believes he can deduce a route to salvation. Utilitarianism and human rights culture are not intrinsic to capitalism. What has emerged in recent decades as an unwelcome intrusion can be exorcised by pushing back to get ethics and community back into the system. The second half of the book reads like an anthology of recent Fabian pamphlets dealing with issues like taxation policy, education and security in retirement which he thinks would get social democracy back on track and returning capitalism into the sort of tamed beast he imagines it once was.
The objection to Collier’s perspective is the standard one of how he managed to invert cause and effect, making what is in fact entirely epiphenomenal to social and economic developments the driving force of the moment in history. In short, capitalism did not become more selfish and individualistic because a particular set of ideologues came out on top at some point in time: on the contrary, the neo-utilitarianism of Friedman and Hayek and Rawlsian rights gained ascendency because the temporary convergence of the nation state and corporate capitalism had been unpicked by profound changes to the way markets had come to operate from the 1970s onwards.
Collier's account can be usefully contrasted with the exploration of the changes in the ways in which securities are traded in stock markets provided by Walter Mattli in his book, Darkness by Design. Looking at the trading floor of the NYSE at any date prior to 1970 is is quite possible to believe that, once upon a time, capitalists did things different and with a degree of honour in the way they conducted their businesses. Securities (stocks and shares) were traded in a transparent public market place, with brokers bound together in a mutual association which made underhand behaviour a severe reputational risk, not to mention costly.
The old ways did not last because utilitarians and human rights lawyers snuck up on the brokers to demand they change their values. It was rather the disembodied logic of capital accumulation which did the deed, asserting pressure for change because the old markets were running short on the liquidity needed to grow their markets. The cash that was needed was locked up in the big banks which had historically been barred from participating in the security exchanges. In the 1970s the barriers to their participation began to come down and, once admitted as member organisations, their sheer size and the vast resources they could draw on edged the small, traditional broker partnerships out the way.
So why couldn't they carry on with the same ethical standards that had been upheld by the specialist brokers who oversaw trade on the floor of the exchange? Mattli explains that they brought with them a pre-existing tradition of off-floor trading which made use of the large pools of clients already on their books as customers. Without having to pay scrupulous heed to the 'discovered' price of securities being traded in the open, the banks worked through 'dark pools' to manufacture deals which more directly served their interests. Markets thus became fragmented and devoid of the forms of transparent oversight which were supposed to keep them honest.
From there the whole sorry story of predatory financialised capitalism takes over. The quest of self -serving advantage through up the whole gamut of special or special order trading which moving deals out of the queues the old system had confined them to, with volumes of trade and price determining who got what. The rapacious appetite of the trader displaced investors who were looking for securities which could be expected to grow in value over longer periods of time. Prices were manipulated through quote stuffing strategies which worked to the advantage of the banks, but exacted a price from investors. The high-speed trading came along, which is a whole other story of predatory, asset-grabbing and milking altogether.
How can the utilitarian philosopher, or the jobbing human rights lawyer be blamed for any of this? Is it any event a predicament that can be remedied by Collier's mix of Fabian enthusiasm for 'pragmatic policies' and nostalgia for the time when we all lived in tight-knit communities in which people looked out for one another?
The appeal for more ethical behaviour recalls the admonishment of another great socialist, RH Tawney, who also rooted his work in an obligation of people to behave better towards one another. But Tawney had less illusion in the merit of the capitalist system than Collier. "You can peel an onion layer by layer, but you can't skin a live tiger claw by claw," he famously opined. Capitalism is a tiger and it will not be rendered passive and useful by bit-by-bit pragmatism. If it not to be permitted to skin us all it will need to be put in a cage and permanently subdued.
November 29, 2019
I think Walter Mattli thoroughly researched this book. I really enjoyed the in-depth knowledge of High Frequency Trading. He made me realize that there are certain circumstances where high frequency trading can be a nuisance. Most clearly, he explains how a bid order can be second in line even though it arrived at the exchange first with the best price. That's not good. But honestly the issues he picks on come off to the layman like peccadillos rather than catastrophic problems.
Like every other industry maybe electronic trading needs additional regulation. What it really sounds like is that there has been massive technological changes that haven't been completely sorted out yet. Maybe the heyday of the old NYSE is over. I have to be honest. The screwing from Wall Street is probably less now than it was in the past. Retail commissions are about zero. Spreads are lower. So yeah, maybe a few people are making out like bandits and shouldn't be. Time will sort that out.
What I found particularly disingenuous was that he separates customers and proprietary traders. Aren't they both customers? He refers to proprietary traders as "market makers". They have more clout because they bought expensive equipment. Still, they are just sophisticated customers. Stock trading is inherently greedy and capitalistic. No one has the moral high ground.
The author laments the death of the Specialist. He compares the profit motive of the market makers to unethical Specialists of old. The good Specialist kept order. Now there is no order. I guess I'm old enough to remember when Specialist was a sought after position because it was easy money. At that time, it was already starting to sound like an outdated position. The average investor never dealt with the Specialist, so the average investor doesn't miss him.
Mattli describes the governance issues that ruined the fairness of the NYSE. Big banks came to dominate after partnerships with one vote each had dominated for over a century. This went hand in hand with the IPOs of century old Wall Street partnerships. I'm not sure how this could have played out differently once the big public bank came to be. Risk taking without personal downside risk was the result.
I think Mattli's research ignores that high frequency trading is helping to move stock trading profits outside of the big banks. That doesn't sound so bad. It seems Mattli would rather go back to a few hundred club gentlemen running the show like in Trading Places instead of a bunch of computer nerds. My point is that someone has always been profiting from equity trading. There was no golden age when no one was getting screwed (i.e. where are the customer yachts). I bet there was a time when horse drawn carriage fares were extremely well regulated, fair, and efficient. No one wants to give up Uber to go back to that time.
While I'm bashing the conclusions, this is still a great book to learn about high frequency trading. Mattli wants a stock exchange to be like a public utility. He wants consolidation to make it easier to regulate. He wants the exchange to be a monopoly so they don't have to worry about getting customers. In effect, he wants a return to the gentlemen's club. No thanks.
Like every other industry maybe electronic trading needs additional regulation. What it really sounds like is that there has been massive technological changes that haven't been completely sorted out yet. Maybe the heyday of the old NYSE is over. I have to be honest. The screwing from Wall Street is probably less now than it was in the past. Retail commissions are about zero. Spreads are lower. So yeah, maybe a few people are making out like bandits and shouldn't be. Time will sort that out.
What I found particularly disingenuous was that he separates customers and proprietary traders. Aren't they both customers? He refers to proprietary traders as "market makers". They have more clout because they bought expensive equipment. Still, they are just sophisticated customers. Stock trading is inherently greedy and capitalistic. No one has the moral high ground.
The author laments the death of the Specialist. He compares the profit motive of the market makers to unethical Specialists of old. The good Specialist kept order. Now there is no order. I guess I'm old enough to remember when Specialist was a sought after position because it was easy money. At that time, it was already starting to sound like an outdated position. The average investor never dealt with the Specialist, so the average investor doesn't miss him.
Mattli describes the governance issues that ruined the fairness of the NYSE. Big banks came to dominate after partnerships with one vote each had dominated for over a century. This went hand in hand with the IPOs of century old Wall Street partnerships. I'm not sure how this could have played out differently once the big public bank came to be. Risk taking without personal downside risk was the result.
I think Mattli's research ignores that high frequency trading is helping to move stock trading profits outside of the big banks. That doesn't sound so bad. It seems Mattli would rather go back to a few hundred club gentlemen running the show like in Trading Places instead of a bunch of computer nerds. My point is that someone has always been profiting from equity trading. There was no golden age when no one was getting screwed (i.e. where are the customer yachts). I bet there was a time when horse drawn carriage fares were extremely well regulated, fair, and efficient. No one wants to give up Uber to go back to that time.
While I'm bashing the conclusions, this is still a great book to learn about high frequency trading. Mattli wants a stock exchange to be like a public utility. He wants consolidation to make it easier to regulate. He wants the exchange to be a monopoly so they don't have to worry about getting customers. In effect, he wants a return to the gentlemen's club. No thanks.
This entire review has been hidden because of spoilers.
June 19, 2023
The book differs from what I had hoped. It is academic and I was looking for more of a Michael Lewis book - something more entertaining.
January 24, 2024
Musings by some journalist, a lot of basic descriptions, digressions, and histories. Little practical value
July 11, 2019
A tidy account of how market fragmentation (dark pools, alternative trading systems) since around 2005 has resulted in rendering the markets a lopsided affair benefiting only those who control the best powerhouses equipped with the most complex algo-machines. The book seems to debunk the conventional narrative that NYSE was a monopoly with little incentive for innovation destined to demutualize in order to survive, by demonstrating that a) it wasn’t a monopoly, b) it wasn’t a social collective with little incentive for innovation.
Instead, the author shows that it is the power politics within the NYSE, through changes in the composition of membership and concentration among big players through M&A (and successful lobbying for Reg NMS) that has given unchallenged privilege to those who are capable of using special order types, abusing dark pools to remain invisible, utilizing colocation, and using enriched private data feeds. Thus ended a relatively efficient system based on a reputation maintained by strong norms, distinct culture, competitive specialists, and above all a tough market surveillance division; replaced by merchants of liquidity, providing only ‘fair weather liquidity’, utilizing asymmetry of information, and manipulative techniques such as stuffing and spoofing thereby creating mini flash crashes.
The worst of it all is that regulators, hopelessly behind the curve, have entrusted the task of addressing the resulting uneven playing field (consolidated audit trail project) to broker dealers, who are the prime beneficiaries of this slanted system.
The author’s solution is to a) increase transparency, b) level the playing field via slowing the latency, stopping discriminatory distribution of data, introducing discrete time intervals for trading, and taxing certain predatory trading tactics, c) increase proper accountability by introducing safeguards, decreasing types of special order types, increasing fines, and d) promote consolidation.
Instead, the author shows that it is the power politics within the NYSE, through changes in the composition of membership and concentration among big players through M&A (and successful lobbying for Reg NMS) that has given unchallenged privilege to those who are capable of using special order types, abusing dark pools to remain invisible, utilizing colocation, and using enriched private data feeds. Thus ended a relatively efficient system based on a reputation maintained by strong norms, distinct culture, competitive specialists, and above all a tough market surveillance division; replaced by merchants of liquidity, providing only ‘fair weather liquidity’, utilizing asymmetry of information, and manipulative techniques such as stuffing and spoofing thereby creating mini flash crashes.
The worst of it all is that regulators, hopelessly behind the curve, have entrusted the task of addressing the resulting uneven playing field (consolidated audit trail project) to broker dealers, who are the prime beneficiaries of this slanted system.
The author’s solution is to a) increase transparency, b) level the playing field via slowing the latency, stopping discriminatory distribution of data, introducing discrete time intervals for trading, and taxing certain predatory trading tactics, c) increase proper accountability by introducing safeguards, decreasing types of special order types, increasing fines, and d) promote consolidation.
September 29, 2019
A hyper-controlled market is not controlled enough. Just give the mike to the new prophet.
Displaying 1 - 7 of 7 reviews