Our Markets Are Working Better Than Ever: Levitt

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March 31 (Bloomberg) -- Former SEC Chairman Arthur Levitt and Rep. Scott Garrett (R-NJ) discuss high frequency trading with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Your initial reaction to this?

Do you believe high-frequency trading brings to market against your average investor?

No, i don't. i think the title of the book suggests small investor is really being taken advantage.

Almost a criminal way.

I think that israel hyperbole.

The two priorities are cost and speed.

The markets are faster than ever before.

Are there problems with on-screen trading the sec and cftc are the appropriate forums for working them out.

You would think logically that this would increase liquidity.

I was surprised that the university of michigan study that said it did not increase liquidity but in fact hindered liquidity.

This is getting back to the issue where your average investor went through the flash crash and 2008 and now they are learning about high-frequency trading, which is computer-generated and feels as least as if the cards are stacked against them.

We have the united states as the deepest and most liquid market in the world.

To your moment of moment -- to your point of moments ago, the question of do we need to overlay additional regulation on top of this to deal with some of the problems that chairman and i also probably agree on that may be out there, and the answer is absolutely not.

If you step back for a moment, you revise part of the reason we are experiencing these problems is to the extent that the overlay and regulations, the regulations have pushed the market in this direction where speed is the only one variable.

It gives you an edge but that is where the regulations basically are directing this type of behavior.

We have records for five years.

What the record show is they never had a down day of trading, except for one day out of five years.

It seems pretty remarkable.

It is almost natural it is a much bigger picture that matt.

Again everything else it has to be reevaluated in terms of the market strategy and new products.

I think the sec is going through a process in looking at the rules that were implemented years ago and has to be changed today.

One firm is doing very well.

[inaudible] some years ago they use the privileges.

Ok, i think we are losing you.

Let me bring the representative and here.

Talking about half of all shares are traded right now have actually been rated to high-frequency trading and this is up from nothing in 1990. the world is changing.

As chairman levin was just saying, as the world changes, maybe the sec needs to adapt.

How do we regulate the industry in a way that does not squash innovation in the market and still make sure it is a level playing field?

This is one area that the sec and the financial services committee that i chair or on the same page on.

We have been hearing and the sec has moved the same direction as well.

Saying we need to we have to take a more holistic approach and step back and realize things have changed looking at the structure of the capital market.

That will send ripples through the investment to midi.

They will say what is the sec going to do now in terms of regulation?

If you were to say we will come out with an -- with the new system to regulate the market.

The old adage, do no harm.

Saying we will come out with a new proposal.

The sec does as well.

Do not do it through a narrow focus but a broader approach to make sure you are not making the system or some before.

That is what we have to do here.

This is another area that i agree that we are in the process of looking at imperial -- empirical data as opposed to anecdotal stories or a new book that comes out that has a sensational title that all of a sudden gets everyone stirred up.

Trish, the chairman of the sec has said she intends to try a number of selective programs to test whether the increments will be traded in decimals or fractions.

That is the way to do it, to constantly test all the regulations to see whether they hold true for today.

The key to regulation is balance.

You cannot stifle innovation, and you still must protect it.

That was a bill we just got out of the committee.

The sec was not there originally with us, but once we kept legislation moving along, i think they are on the same page with us.

Doing a pilot study program that allows a number of the industries to be in it.

You do a pilot program in a specific area.

This text has been automatically generated. It may not be 100% accurate.


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