Courtesy of Pam Martens.
Senator Carl Levin opened today’s hearing on high frequency trading before the U.S. Senate’s Permanent Subcommittee on Investigations with this opening statement:
Senator Carl Levin: Opening Remarks, June 17, 2014
Conflicts of Interest, Investor Loss of Confidence, and High Speed Trading
In U.S. Stock Markets
Senator Carl Levin
Most Americans’ image of the U.S. stock market is shaped by a single room: the trading floor of the New York Stock Exchange, where traders await a ceremonial bell to kick off the day’s activity, then trade shares worth millions on scraps of paper.
In reality, most shares are traded not on a floor in Manhattan, but in racks of computer servers in New Jersey. Trades happen not at the speed of a human scribbling on paper, but in the milliseconds it takes for an order to travel through fiber-optic cables. And increasingly, the money made on stock markets comes not from thoroughly assessing companies for their investment potential, but from exploiting infinitesimal advantages at unfathomable speeds, earning billions off price differences measured in pennies or less.
We are in the era of high-speed trading. I am troubled, as are many, by some of its hallmarks. It is an era of market instability, as we saw in the 2010 “flash crash,” which this subcommittee and the Senate Banking Committee explored in a joint hearing, and in several market disruptions since. It’s an era in which stock market players buy the right to locate their trading computers closer and closer to the computers of stock exchanges – conferring a miniscule speed advantage yielding massive profits. It’s an era in which millions of trade orders are placed, and then canceled, in a single second, raising the question of whether much of what we call the market is in fact an illusion.
Read also: Flash Boys’ Enablers Under Oath Tomorrow in U.S. Senate Hearing.
