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Summarizing Mary Schapiro's Comments On Being Only 20 Years Behind The Market Structure Curve
Mary Schapiro is making some waves at the Economic Club of New York, where for the first time ever, she has given some indication she is only two decades behind the curve when it comes to a market that now has a 5 to 1 ratio of HFT to retail participation (yes, you are all not only frontrun daily, but also surrounded by Sky Net). Here is a summary of her key points from the Economic Club speech earlier, courtesy of Themis Trading.
Here is a brief summary of Mary Schapiro’s speech at the Economic Club of NY which she gave today at 1pm.
- Stable fair and efficient market structure are the backbone of our capital markets.
- If equity market structure breaks down, investors and companies pull back.
- US equity market structure has changed dramatically in recent years.
- NYSE executes only 26% of its listed market.
- Prop trading firms now play a dominant role in equity market. They represent more than 50% of volume.
- 90% of orders are cancelled.
- Quality of price discovery and a fair, level playing field
were questioned in the SEC Concept Release comment period. - May 6th was clearly a market failure. SEC has already taken some action (circuit breakers).
- Some have argued May 6th was an aberration. She disagrees.
- Every single week since May 6th has seen an outflow of funds from equity mutual funds.
- Impact of severe price volatility. On May 6th, retail investors use of stop-loss orders to protect themselves backfired on them. $2 billion of stop loss orders were triggered in that 30 minute period. This amounts to $200mm in losses if using a 10% conservative price move estimate.
- Institutional investors are concerned about US equity market structure.
- SEC has already proposed rules on naked sponsored access,
large trader reporting facility and a ban on flash orders. All are
important but likely NOT sufficient.
SEC must look at full range of issues:
- Reexamine circuit breakers (errant tripping of
circuit breakers). Will now look at limit up/limit down breakers
instead. She would like both the trading pauses and limit up/down
benefits. What type of parameters are best for market to not hurt price
discovery? - Obligations for HFT – affirmative obligations to support stability of market. Where were the HFT on May 6th? Why did they pull back? Should todays liquidity providers also be subject to negative obligations?
- Quote Stuffing – does this hurt price discovery? Minimum time in force for quotations would be one remedy.
- Market Fragmentation – Dark pools are increasing
(30% of volume) –what is their effect to price discovery? However, dark
Pool volume went down to 10% during Flash Crash. But institutional
investors still fear the lit markets because of predatory trading.
The SEC will not attempt to turn back the clock. But
the SEC needs to examine if our market structure rules have kept pace
with today’s market.
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Talk is cheap...lets see some action...and I advise not to go back into equity market until substantial action is taken in all areas......don't let her con you back in the kitchen with soothing words alone.
80's bitchez
Wow, did most of the HFT's decide to lay low for the time being? Volume is anemic today. Kind of funny to see C change price only $0.01 in the past few hours.
So I see an algo is in complete control of C today...http://finance.yahoo.com/q/bc?s=C+Basic+Chart&t=1d
"It's not a market. It's a crime scene."
Now THAT is truth...
The NYSE should replace the giant flag with crime scene tape.
Here is a brief summary of Mary Schapiro’s speech at the Economic Club of NY which she gave today at 1pm:
"Hi, my name is Mary Shapiro, and I am a captured regulator."
...."Hi, Mary"...
lol
+10
90% of orders are cancelled.
This is all one needs to hear.
Does Ebay work that way?
LOL. I can't wait until Skynet takes over Ebay listings. They will run the price of physical gold up to a million an ounce by stuffing bids and just buying the same 1 ounce Krugerrand over and over again from each other. Can't wait to get outbid by $0.001 on my next coin.
Plus, Ebay already offers volume rebates with ebay bucks. It will be a good thing because they will be providing liquidity, too.
Already happened. They front ran lunch with warren buffet. They actually had one person giving 3 and 4 increasing offers without a bid against them.
She's off the reservation ??? Mayday, mayday !!! I doubt it. Sound like an "I inherited this shit" story once again.
she's pathetic...
Minimum time in force does not enforce anything. The circumvention is already in place and will still work if it is increased from ~10ms today to 100ms or 1000ms. Some tweaks in the algorithm but nothing major...
I'd suggest to limit the order cancels instead. You will not send 5000 single lot orders per second if your cancels are limited to only 50 or so, for example. If you really want to trade all those shares, use block orders. Network traffic will come down and latency will be improved in the process.
Charge 1 cent per canceled order. Send the money collected to finance SS - That will end it in a hurry!
+1. Screw a banker, save a grandma.
More pennies to write IOU's against!
WTF, this is from the people who are to ensure an even and fair trading venue for all market participants. The actual capitalistic values and beliefs this country was founded upon and looked upon and admired by all other countries for several decades. Now look at it, what a disgrace and complete shamble of unregulated fat cat bankster rigging for all to be continually slaughtered like sheep. And she states 17 straight weeks of equity withdrawals like that may be a problem. Fuck, the problem is her bureau being paid to sit idly by and watch the outcome to see if King Kong destroys us all before doing something. The gorilla is out of the cage and you people don't seem to care that King Kong is scaring off all aspects of the market you need to have to have something to regulate. Cudos to you Shapiro for being over paid and running an otherwise worthless agency. Thank you for the memories.....
On the one hand I hate how HFT affects my trading, on the other I hope the whole market structure get's whacked to pieces. People shouldn't rely on stocks to fatten up their wallets - they should work, i.e. produce, then they can go out and buy things - WITH NON BORROWED MONEY. Kinda of hard when the government, schools and media pumps everyone with these blatant keyenesian lies. 'nough said - Ron Paul for Prez Bitchez!
Young check out his most recent speech. A complete work of art. How can anyone not want this reincarnation of a founding father as their President. I love this man.
http://www.youtube.com/watch?v=FobnAnrFG3c
Thank you John! Always a pleasure!
That was a super speech. He is a true patriot that understands our constitution. I agree with your sentiments 100%.
Tyler you might want to pull up the last clip from CNBC that ended at 2:50
Micheal Pento just made Erin shall we say, "flustered" when asking here to connect the imaginary dots on why foreign investors will continue to buy bonds when our GDP will be 75% debt in a few years. She had nothing but hopium to defend her position so she called him rude and basically stated he will not be permitted back on CNBC.
http://www.cnbc.com/id/15840232/?video=1585891838&play=1
Enjoy!
3 minutes to magic hour kids. Should be interesting to see if they take it higher or fill the gap first... hell, maybe they'll do it all in one hour!
It's going to take one big, badass mofo to straighten this all out. Meddle too much and you will surely get the eternal dirt nap. Ergo, the BBMF must be "untouchable".
Why fight the natural elements of the K Wave winter?
Comment moved.
Just look what they did with Naked Shorting. Put the Stocks on a "SHO" List. If the stocks were on the SHO list no one was supposed to be able to short them and anyone naked short was supposed to cover. Did not happen. They gave the Money Makers and the Option writers an exclusion. In effect the only people that could not short were retail traders. It gave the Retail Traders the impression that those stocks would be safe to buy. But, quite the opposite. The Stocks on the SHO list just became the list were no one would buy those targeted stocks and the Market Makers and Options writers continued to take them down. Some stocks stayed on that list for close to 3 years.
It was just an illusion to get the Retail Investors feeling comfortable again and then the Market Makers and the Option writers creamed them. Many of the Companies on the SHO list ended up out of business or bankrupt. So much for the SEC fixing anything.
Take it to 0 ZERO and start over again!
SEC has been looking at HFT for over a year. During that year the Banks that own the HFT Computers have taken out BILLIONS from the Market and given the Money to themselves a Bonuses.
Retail Traders has done in like kind. They have taken out BILLIONS from the Market to safegard their Money from the HFT Traders.
Regulators fail to do their job and HFT Computers are allowed to run ruff shot over Retail Investers. Retail Investers do the only thing they know how. It is to Withdraw. Withdraw all of their Money and support for the Banks and the HFT Computers trying to scam them every day out of their hard earned Money.
If GS alone was able to take out around 25 Billion from Trading the Market and paying themselves 25 Billion in Bonuses. Someone had to lose that Money. So, how much are you willing to donate to Wall Street Bonuses from your 401K or Retirement Account before you say enough is enough.
I believe that Money in the Market is just a contribution to Goldmans Bonus Pool. So, if you like to donate to Goldmans Traders Bonus keep your Money in the Market. If not put it somewhere they can not get to it.
Expect a 3 month comment period where the insignificant retail crowd may submit ideas for rejection. By Sept. 2011 the SEC will have and grand plan, from a blue ribbon panel on how we'll move forward. Meanwhile, please mark all your FOIA request as junk.
I know this may sound off the wall, but is it really impossible for someone, some organisation - say Google - to set up a new market away from NYSE on the Internet. I ask for a quote for XOM and get a range with all the possible bids/offers. I put up my bid or offer on XOM. Somebody hits the button. A code comes which is passed to agents who have access to the codes giving the name and address of the buyer or seller. Validation of ownership is logged somewhere. Payment through a PayPal system. Change of ownership noted. The outstanding share issuance of the company is constantly checked and must balance at the end of the trading period.
This market is only accessible to private individuals and equity mutual funds. No banks allowed or hedge funds.
Is it really impossible??
After all, if any system ceases to have credence and cannot be trusted it is bound to die a death. Something will happen for sure.
...oohhh-la-la... Ebay bitchez... love... it...
The summary of her speech sounds like just max and min price movements. Nothing about quote stuffing, etc.
I'm basing that on the Bloomberg report.
I wrote a story (fiction) on this topic using one of my characters from another work:
“The Exchange" or The Firebird Goes to Wall Street
http://madscienceunlimited.com/fiction/theexchange.html
In which a woman gets her savings back and punishes the villains in the bargain. It's slightly naughty, broadly funny, and answers the question: What does a girl do with 4 trillion computational units?
cougar_w, I enjoyed your story. Maybe you can sell it to a video game company -- This line was quite classic:
“This is where you lose, suckers!” Fortran shouted over her own laughter. “The mad woman is in the house! If you've got any more than this you better roll it out because I'm here to eat you alive!”
Let me know when you have another installment.
Regards, theadr@yahoo.com
PS I never thought I would be a robotaphiliac!
One more thing cougar_w:
Your story flows quite well with:
http://www.archive.org/details/pjt2010-08-20.mk5_16bit
DOW/S&P500/FTSE/EURO short signal continues :
http://stockmarket618.wordpress.com
Aiee...
I wish I was as smart as these SEC people.
Joe Saluzzi, Hugh Hendry, Chris Martenson, Max Keiser and Tyler (and several others!) - thank Heaven for people like you.
DavidC
The SEC is the quack doctor that killed its patient. That foetid stench filling our nostrils is the market's rotting corpse. Mary was clearly the wrong man for the job.
Nice article thanks.
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