Former U.S. Commodity Futures Trading Commission member Bart Chilton, an outspoken critic of some high-speed trading practices while at the agency, has been enlisted in a Washington-based effort to improve the image of an industry beset by regulatory and legislative scrutiny.
The Modern Markets Initiative, organized by four firms last year, has hired former Bank of America Corp. and Nasdaq OMX Group Inc. executive Bill Harts to lead its efforts, the group said in a statement today. Chilton, now a senior adviser at law firm DLA Piper, was hired to advise on regulatory and public policy, according to the statement.
“The role and benefits of high frequency trading are misunderstood by many,” Chilton, who left the CFTC earlier this year, said in the statement. “Through education, transparency and the right type of constructive regulation, HFT’s role will be accepted and endorsed as essential to today’s modern markets.”
High-speed traders have faced increased scrutiny this year since Michael Lewis’s book “Flash Boys” alleged that stock markets are rigged against retail investors. Eric Schneiderman, New York’s attorney general, has subpoenaed high-speed traders including Chopper Trading LLC, Jump Trading LLC and Tower Research Capital LLC as part of a probe into automated trading, a person familiar with the matter said in April.
Meanwhile, the Securities and Exchange Commission and CFTC are investigating whether the traders benefit unfairly from better access to data or other incentives.
Congressional lawmakers have held hearings in response to the concerns. Senator Carl Levin, the Michigan Democrat who leads the Permanent Subcommittee on Investigations, held a June hearing to examine conflicts of interest that he said are leading to the erosion of investors’ trust and confidence.
While at the CFTC, Chilton frequently called for curbs on high-frequency trading, dubbing the firms “cheetahs” for their speed in markets. He called on regulators to require the firms to register and have “kill switches” in place to shut off algorithms or trading strategies that can go rogue.
Modern Markets Initiative’s members are Global Trading Systems LLC, Hudson River Trading LLC, Quantlab Financial LLC and Tower Research Capital, according to the statement.