Published CommPro.biz 2014.04.01

High-Speed Trading 

Too Fast To Lose

Let's trim the Buccaneer's sails

 

Financial whiz turned best-selling author Michael Lewis, explains in The Big Short how greed-driven monster banks ran the world economy over the cliff. Why not? They knew that if anything went wrong they had nothing to worry about; they were “Too Big To Fail.” In his new book Flash Boys Lewis explains how high-speed traders make suckers out of large and small investors, rigging the markets in a we-win-you-lose game.

Sunday night (2014.03.30) on CBS 60 Minutes, Lewis explained how these buccaneers of the financial seas fly in and out of the markets in milliseconds, picking up pennies on zillions of trades. By purchasing advance information, they know where you’re headed and are able to buy target stocks split seconds before you do. By the time investors –the funds where your 401K resides, or the pension fund caring for grandma’s life savings– get to the market, the high-speed traders have jacked up the price, sold to the suckers and made off with their plunder.

The 60 Minutes Lewis interview follows tight on the heels of New York State Attorney General Eric Schneiderman’s launch of an investigation into the data sources high-speed traders lay big bucks on to get this jump on investors. Traders are just that, traders with no interest in supporting the markets. Currently all this is legal; it’s what drives the number of daily trades into rarified atmosphere. However, it has nothing to do with the purpose of the markets. In fact high-speed traders serve no social purpose whatsoever. They will tell you that they have reduced the cost of trades. While that is true, any savings long-term investors see are lost to the increased stock prices they pay. High-speed trading is miles beyond unethical and amoral.

The big exchanges, NYSE and Nasdaq, profit mightily; the latter reported tens of millions from selling data last year. That doesn’t include the rent they pocketed for allowing the high-speed traders to locate their computer servers side-by-side with exchange servers giving them another edge. What’s even worse, these high-speed buccaneers play the markets virtually risk free. One firm bragged that they have seen but a single day in the last five years when they lost money. They are literally “Too Fast To Lose.”

Lewis and Schneiderman are shining a light on these slime bags. Now it’s time for the Congress to act. There is a simple way to return the markets to their purpose, “The provision of capital for our economy.” Adjust our tax structure to collect 99% of profits on property held for less than an hour. And 90% on property held less than a week, 80% less than six months, 70% less than a year, 25% less than five years, 15% less than 25 years, and tax free on any property held over 25 years. That would fit in nicely with Warren Buffett’s declaration that “never” is the best time to sell a stock.

It would be good for capitalism; it would be good for Americans, for all of us.

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