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Schumer To SEC: "Impose Tougher Rules On HFT Traders To Curb Stock Price Volatility And Prevent Another Flash Crash"
SCHUMER TO SEC: IMPOSE TOUGHER RULES ON HIGH-FREQUENCY TRADERS TO CURB STOCK PRICE VOLATILITY AND PREVENT ANOTHER FLASH CRASH
In Letter To Schapiro, Schumer Urges Update To ‘Market Maker’ Definition To Ensure High-Frequency Traders Acting Like Market Makers In 25 or More Stocks are Subject to Affirmative Obligations
Enhanced Obligations Would Prevent High Frequency Traders From Withdrawing From Markets En Masse—Sudden Loss of Liquidity Contributed to Market Meltdown on May 6
With SEC Mulling Reforms To Prevent Another Market Crisis, Schumer Says Proposals Could Represent ‘Consensus’
WASHINGTON, DC—U.S. Senators Charles E. Schumer (D-NY) today urged the Securities and Exchange Commission (SEC) to place certain high-frequency trading firms under a uniform set of rules to prevent them from pulling out of markets en masse as they did during last May’s flash crash that sent stock prices tumbling. Schumer said updating the agency’s 17-year-old “market maker” definition so that more of these traders had affirmative obligations when it comes to providing liquidity could go a long way towards preventing future volatility in stock prices.
“The Commission should require any market participant effectively making markets in 25 or more symbols to be subject to market maker obligations. Requiring more high frequency traders to be legally obligated to step in and provide liquidity would go a long way in helping to avoid sudden, rapid price plunges like the May 6 Flash Crash,” Schumer said in a letter to SEC Chairman Mary Schapiro.
Schumer proposed a number of new obligations that would be imposed on all traders who are dealing in 25 or more stocks. These include a best price obligation that would require market makers to quote between the highest bid and lowest offer price for a minimum amount of time during each trading day, and require that market makers quotes be reasonably related to the market price, which would effectively ban so-called “stub quotes”, which are widely believed to have contributed to market volatility on May 6. Many of these obligations are currently imposed on designated market makers by the New York Stock Exchange, but not all trading venues have designated market makers or impose affirmative market-making obligations on market participants. Schumer also said the proposed obligations should apply uniformly across all trading platforms to ensure a level playing field and avoid the kind of disorderly markets experienced on May 6.
Since many of these proposed requirements enjoy preliminary support from leading market makers and market participants, Schumer suggested a “consensus” was already emerging around these ideas.
A copy of Schumer’s letter to Schapiro appears below.
August 11, 2010
Mary Schapiro, Chairman
Securities and Exchange Commission
100 F Street NE
Washington, DC 20549
Dear Chairman Schapiro,
The causes of the May 6 Flash Crash are still under investigation, but we have learned a number of important lessons about our markets and how they have dramatically changed in the past few years, presenting new risks. I am writing to express my concern about certain of those developments and to respectfully suggest that the Commission consider steps to address the risks they pose to investors and to the integrity of our markets.
One of the most important new developments – and one that many observers and market participants think contributed to the market’s volatility on May 6 – is the role that high frequency traders now play as de facto liquidity providers. The traditional definition of bona-fide market makers developed to describe the upstairs specialists of the old trading floors is now largely irrelevant. During the May 6 Flash Crash many high frequency traders pulled out during the freefall, leaving a dearth of liquidity and exacerbating market volatility. This disappearance of high frequency traders and their withdrawal of liquidity reveal a serious problem with our market regulation. The players in our markets have changed but our regulations have not kept pace.
Accordingly, I respectfully urge the Commission to consider the following proposals to restore confidence in our markets and reduce the likelihood that another, potentially more severe Flash Crash, occurs.
First, the Commission should update its definition for “bona fide market maker”. The definition of “bona fide market maker” has not been updated since 1993 and therefore does not reflect the new market landscape of high frequency traders and alternative trading systems. The reality is that many high frequency traders are today’s de facto market makers. However, they are not subject to the legal obligations of market makers.
The Commission should require any market participant effectively making markets in 25 or more symbols to be subject to market maker obligations. Requiring more high frequency traders to be legally obligated to step in and provide liquidity would go a long way in helping to avoid sudden, rapid price plunges like the May 6 Flash Crash.
Second, the Commission should bolster the obligations of such market makers to provide meaningful liquidity and stability in the markets. I respectfully request that the Commission consider incorporating the following market maker obligations:
• Best Price Obligation: Market makers should be required to quote between the highest bid and lowest offer price for a specified percentage of time during the trading day depending on stock price, trading volume and other characteristics of the stock. This would ensure that market makers provide meaningful liquidity at market prices.
• Maximum Quoted Spread: Market makers should also be required to post quotes that are reasonably related to the then-current market price, presumably within the percentage triggers for circuit breakers. This would eliminate the practice of posting so-called “stub quotes”, widely believed to have led to many of the cancelled trades on May 6.
• Depth Obligation: Market makers also should be required to provide multiple price levels below the best price obligation depending on volume, stock price and other characteristics of the stock. Making markets should not be limited to the superficial level of the best price. In order to be strong, resilient and less volatile, markets should be as deep and liquid as possible.
• Uniformity Across Trading Venues: Perhaps most importantly, the eligibility requirements and obligations of market makers should be uniform across all exchanges and trading venues. Some exchanges require fewer obligations of their market makers than others. It is important that there is a level playing field between all trading venues and that this playing field has high standards that protect the best interests of long-term investors.
A consensus is emerging around many of these proposals, not only among exchanges but also among many leading market makers and other market participants, who sent you a letter advocating many of these proposals on July 13.
The above obligations are burdensome and making markets is voluntary, so the Commission should consider appropriate incentives for high frequency traders to become market makers.
I commend the excellent work you and your staff are doing, and I look forward to working with you on these important issues.
Sincerely,
Senator Charles E. Schumer
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WORMHOLE ALERT!!!!!
Did Schumer actually just say something logical with which I could actually agree?
First time for everything, I guess...
yea, that fucktard who helped gut the so called financial reform bill to protect his wall street mafia bosses. yea that asshole.
+ 1m that fuctard will shake down on contributions. I hate him!!!
And run over anyone that gets between him and his only true love. A TV camera crew with a hot mic. The very definition of what Dead Head called a phucknut.
After our $500 million spanking we have billions to spread around. Man we've got this wired. He knows our game plan (banter and stall and say "what a great idea") - we've spent too much $$ developing these programs for us just to bend over.
Schumer really is our best friend. He gets the limelight and to hear himself talk like he's watching out for the the people and we make billions!! I love, love, love, him!
Yeah, they will pass a 1200 page bill that will need 2 years of research before it can be implemented.
And then it won't be
Bingo! this guy is all about pandering to the people when it suits him best and then just conveniently forgetting about it.. this is another, soon to be example.
Predicted headlines to follow:
Yeah, to make it work, you'd need an aggregation rule, an affiliate definition rule, like in sections 23A and 23B of the federal reserve act, and a deemed control rule like in the bank holding company act. Rotsa ruck!
+ 100000000000000000000000000000000
Methinks the man doth understand the complexities.
We need to run for office Miles. We can do this. We know the playbook. Like our democratic congress critter. Back and fight for symbolic initiatives that DO nothing. You know who I mean...
Indeed we do. I can see how we would be great at working the CN, security mom & donation circuit .. and perhaps a change from Babs to Layne would work wonders with the under 50 demo. If not now, then soon. Very soon. Especially since all the symbolic structures & initiatives in the world cannot replace the simple process of alchemy between humans. peace pal
Just public cover being created. You know, CYA.
No one's going to make any changes just when the feeding frenzy is beginning to wind down. With the big houses falling from their perfect first quarter trading performance, no way will they take this sugar daddy away from the children. Think about all those poor deprived bonus babies who are in danger of reduced payouts from the bonus pool if they reduce the thieving.
Just words to convince the shorn sheep that someone's on the case. Now where did I put those industrial electric shears? Time to take the other half.
Quick, put that lambs ass against the wall and shove an apple in its mouth - the violation has got to end!
Amarillo Slim, the greatist proposition gambler of all time held to his fathers maxim: "You can shear a sheep many times, but you can skin him only once."
Why are people applauding? I seriously doubt his intent is to diminish the role of HFT in pushing asset prices to outrageous bubble levels. He isn't saying that HFT is fundamentally wrong (which I believe), or arguing that the banks should stop stealing pennies before any real trades are executed.
Instead he's trying to put in legislation that stocks driven by HFTers can't go down. The goal? Ensure that stocks only go up.
Don't put in rules for the HFTers. Abolish the practice. They serve no purpose in properly functioning markets, and they are stealing from the true participants.
dont get to carried here Turd. Scumbag Schumer is just trying to covert his arse when this whole thing blows up. Its more evidence we are getting close to the end as the bankster elite, of which Scumer is most certainly one, realise the game is almost up. When the lynch mobs come for him he can say "look, i tried to stop it" while he has supported and profited from all the crooked behaivour and abuse on wall steet for years.
Scummer is a dual allegiance, israeli firster, zionist, traitor and should be hung!
What most do not understand is that it takes a lot of iterations to train Neural Network software to rape and pillage with no mercy -- and now you want them to be "Kinder and Gentler?" -- get a cluebat, Schumer!
Good luck...
The "boom" part happens if the SEC actually does something about it..
And that will be the SEC downloading the following:
Boom-boom Betty does Dallas
Boom-boom Bobbie does San Francisco
Boom-boom Bama does Liberty 33
No. No. No.
Mr. Boom Boom Betty does Dallas.
Mr. Boom-boom Bobbie does San Francisco.
And the real reason you can't get the real birth certificate....
Mr. Boom-boom Bama does Liberty 33
Before the sex change:
http://www.blackosama.com/obama-chick.html
Great, now I gotta rinse my eyes and cortex with Clorox!
Wall Street traders tired of having their jobs stolen by robots and investors fears of robots.
Estos hijo's de puta maricones de mierda!!!
Sq,
You got dat' mierda correct.
Schumer, should be tried,hung,drawn and Quartered.......
Nah, too easy a way out.:>)
Maybe we could leave Chas. on a steamy small island with Barney Frank?
. That knobgobbler Schumer saying something even remotely sensical? This must be bizarro world
(Bats eyes big and innocently) Wonder if he is up for reelection?
No regular voter will understand a word of that. That was for Wall Street donors who don't have their own HFT ATMs. That man is a master at selling himself and the dumb books he writes for fast cash. Prediction: After "The Public Serves Us" he" ll own the largest chain of Payday lenders and sell CDSs on tranches of borrowers. Then he'll expand into exchanges for day traders because the CDS expire so quickly. Then there will be HFTs for Payday lendors CDSs. It'll be a whole new market.
"Hey dude, 4500 guys on the bid betting you won't pay".
"Man it's only $400"
"New CDSs Squared"
"Wonder how much they'll pay me to file a BK"
Nice cover.
Effin hilarious.
I wonder who on Rahm's staff supposedly drafted all that?
Hang him high or drown him low.
Did somebody forget to brib...err...donate to that POS again?
Some had an explanation
High Frequency Terrorism: How the Big Banks and the Federal Reserve Maintain Their Death Grip on the United States by David DeGraw and Max Keiser http://www.globalresearch.ca/index.php?context=va&aid=19095Simple...
ONE second min....
Ahhh, Sen. Chuck Schumer, the Empire’s point man from the Empire State, always on the side of the owners of the Empire.
Schumer is one of the major players for TPTB in Matt Taibbi’s latest hard hitting article in the current issue of Rolling Stone: Wall Street’s Big Win: Finance reform won’t stop the high-risk gambling that wrecked the economy—and Republicans aren’t the only ones to blame.
Here’s Taibbi on Schumer:
Still, during the last round of negotiations, Merkley and Levin managed to pare back some of the worst of the exemptions. In one victory, they eliminated a proposal by Geithner that would have allowed banks to make unlimited trades "in facilitation of customer relations" – a loophole so laughably broad that it would cover, in the words of one Senate aide, "pretty much everything" that banks wanted to do. By June 25th, when the bill headed to its final meeting of the conference committee, it looked like Merkley and Levin would finally get their vote.
But that was before the senator from Wall Street showed up. In the final hours of negotiations, a congressional delegation from New York, led by Sen. Chuck Schumer, decided to take one last run at gutting the Volcker rule. It was as though someone had sent the scrubs off the court and called in the varsity. Schumer, a platitudinous champion of liberal social issues, moonlights as a pillbox-hat bellhop to Wall Street on economic matters. The self-aggrandizing New Yorker has not only fought to keep taxes low on hedge-fund billionaires, he got up onstage with Goldman Sachs CEO Lloyd Blankfein at a Democratic fundraiser in 2006 and performed "nostalgic furniture-store jingles."
This bears repeating: The person in whose hands America had placed its hopes for finance reform was someone who once sang furniture jingles onstage with Lloyd Blankfein.
Now, as the bill headed into final negotiations, the Schumer coalition suddenly decided that the de minimis exemption for banks simply wasn't big enough. In a neat trick, Schumer's crew agreed to keep the exemption at three percent – but they raised the limit dramatically by making it three percent of something else. Instead of being pegged to a bank's "tangible equity," the exemption would now be calculated based on a financial firm's "Tier 1" capital – a far bigger pool of money that includes a bank's common shares and deferred-tax assets instead of just preferred shares. In real terms, banks could now put up to 40 percent more into high-risk investments. "It was almost double what Geithner was talking about the night before," says Merkley. "For Bank of America alone, it comes to $6 billion."
Schumer himself entered the change in the Senate version of the bill – and then asked the House to sign off on it 15 minutes later. Rep. Paul Kanjorski of Pennsylvania, who had worked hard on the Volcker rule, tried to get a vote to block the change. But Barney Frank laid into him. "You had plenty of time with this," Frank barked. "You knew what was coming – siddown."
Thus the Merkley-Levin across-the-board ban on risky proprietary trading became a partial ban in which insurers, mutual funds and trusts are completely exempt, and banks can still gamble three percent of their holdings. In practice, it will be up to future regulators to define how that limit will be calculated – and one can only imagine how far banks like Goldman Sachs will manage to stretch the loopholes in what's left of the Volcker rule. "It's not a total nothing burger," sighs one aide. "But, by the end, it didn't change a whole lot."
http://www.rollingstone.com/politics/news/17390/188551
I had read that story but didn't make the name connection. Schumer must be looking for more bribes. What a douche bag.
I have to say: Stories like that really piss me off. What a fuckin rigged system we live in.
Of course, I already new it, but they are so blatantly on the take now, we are living in an Obomanation of goverment with legalized racketeering and fraud
GEORGIANS
CALL YOUR SENATORS AND PUSH THEM ON HFT
WE CAN'T LET THIS YANKEE DOUCHE SCHUMER BE MORE PROACTIVE THAN US
Chambliss: 202-224-3521
Isakson: (202) 224-3643
"The above obligations are burdensome and making markets is voluntary, so the Commission should consider appropriate incentives for high frequency traders to become market makers."
Huh? Co-location and liquidity rebates aren't enough? Am I missing something here? While we tighten up in one place maybe we should give more somewhere else? WTF.
Colocation and rebates are available to anyone so no they are not 'enough'. All this whining about HFT is pathetic. No one is stopping anyone else from playing the game. The barriers to entry are very very small. Flash crashes and their ilk are a boon to the small investor who can leave any orders they like in any book they like way away from 'fair value'. If they get hit in a flash crash or panic then yee haa. For some bizarre reason the ZH orthodoxy thinks that going back to one market like the NYSE, controlled by specialists quoting stocks 1/4 wide is nirvana. I'm having a hard time understanding.
Translation: HFTs behind on protection payments.
Schumer will get on their political contributions list with a request that they turn the letter into a 10,000 page bill that only the HFT's accountants and lawyers can understand.
Buzzsaw99 is right on.
I don't know Schumer and as I non resident of the US I don't care, but this proposal seems logical and a good one for markets well beyond the local market of the US.
HFT has ruioned the Market. Retail know they are out gunned by the computers. Day traders are long gone as you cannot get into a position which moves against you without losing money.
The HFT Computers are eating each other as there are no Retail Investors to feast on. They have pulled their Money out of the Market after losing to the HFT Computers. Even with .05% interest they at least have their principal.
The HFT's made a lot of money when there were daytraders and Retail in the Market but now they are out they have to canabalize themselves or other Banks to make a profit. Their profit will drop substancally when there is no one to take advantage of.
We have to remember with those record profits someone had to lose that money for their gain. I guess the retail invester stopped using their 401K's to finance their life style.
On another note, I think NYSE Floor Traders are having trouble making a living. With the Daily flatline there is no opportunity to trade the Market. You have to place your bets an HOPE. Even the Floor Traders are not smarter than the Computers.
In my opinion the Computers count the Buys vs Sells or Short vs Buy to cover and goes in the opposite direction of the majority. That is how they make their money. Floor Traders do not have the Technology to compete.
What chance does the average American have. TBTF Banks get saving Deposits at .05%, they get 0% at the Fed Window. 3% on the Bonds they buy. Frontrunning every trade that happen in the Market to make a few pennies or Dollars if they front run enought trades.
Not only raping every American with their 401K from 2008. No most stocks have not returned to their prior high except a very few like the Wall Street favorites Aapl, Goog, Amzn etc. The rest of the Market never returned to prior highs. Just a delusion as everyone watches the Big Boys and not the under played and underloved stocks.
No wonder no one wants to be a part of the Market (Casino) run by the TBTF Banks at everyone elses peril.
Indeed, you are right. Every company I follow has gotten back to approximately a third of the value before the meltdown. They hit that wall and then were HFTd nearly to death. They need capital to go forward, and are seeing ever shrinking sources. One company's enterprise value is twice the share price, yet it can't get off the floor, even with good quarterly reports. Without the real liquidity of long-term retail INVESTMENT, I don't see much ahead except pain and bankruptcy for a lot of very important businesses.
so... schumer identifies HFT algos as a serious threat... and the solution is legislation that requires the algos uninterrupted participation in the "market"...
classic!... the crisis and "solution" solidifies... indeed, legally requires.... the perpetrator's position right behind us with erect phallus extended...
HFT boys took this directly out of the fed's own play book... create a "crisis" and ensure that you are the solution... well played lloyd!
YEA lets get in there and 'regulate' the market now that its empty of any retail investor and robo trades all day! Great idea Senator youre a fukin GENIUS!
Why would we do that.
Seriously. The HFT's are an AWESOME force on forcing leveraged decay to occur in the shadow market. Screw equities. Screw bonds. It's all pretend leveraged debt to begin with so why stop them? If idiots want to take the mickey out the system, let them.
Just collect names right now, four years from now the same idiot sticks won't have a nickle to rub together. Make sure you rub them out to the last child and first cousin. Don't need them where we are going.
Seriously, pull up the deck chair and let's watch it burn then take it back properly.
Those that want a scary term to look up.
leveraged decay...google it..then shit pants. Learn the math and then shit pants again. Or use it. Very handy if you trade instead of invest...whatever "invest" means anymore.
BTW all I read was butt hurt is a bull long position in the article. So he and his crew can't read a five minute chart. It is literally nobody's problem if he sucks ass at trading. This isn't soccer, there are no rules, just a trigger.
Hate reading articles like this. People with average IQ's that don't build their own tools or formulate their own ideas to trade get screwed. You want to run a business, then run one. Want to trade, then trade. Bitch if you want about the lack of your technology and understanding of trading, but how is that anyone else's problem. Be smarter, buy your own HFT's or build them.
Boo hoo, you lost. Suck it up princess and move when the punch is thrown. If you really wanted to know what business was you would have understood engineering or sciences. Not my problem all you want ed to do was add and subtract in university. You want to fight fire with fire, then buy the solution instead of dicking around pretending you mattered.
//revenge o the nerds
Anyone with a BASIC compsci degree, a database and basic trig can figure this shit out. If you are still barking at the moon, your problem.
How about a rule where the SEC has to enforce it already existing rules.
Not that anyone could find out either way anymore...
Front running is supposed to be Illegal. Yet, with HFT computers it is acceptable. Why? The Computers can also trade in sub pennies. Why can't the average Trader. Different rules for the Elites.