Schneiderman: Markets Have Credibility Problem

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March 31 (Bloomberg) -- New York Attorney General Eric Schneiderman discusses his investigation into high-frequency trading on Bloomberg Television’s “Market Makers.” (Source: Bloomberg)

This morning.

Would you agree with michael lewis's characterization that the stock market is rigged?

I know you described it in the past as on fair.

There is a difference between unfair and rigged.

I would not be as hyperbolic as that.

We looked at the use of information that did not fit into traditional categories of insider trading, but because of these algorithmic high-frequency computers they could use information that before was really useless.

Thomson reuters was the best example, because we learned that in addition to releasing this information, they gave a two-second edge to customers using high-frequency, which a decade ago would have been irrelevant.

It creates a problem.

We stopped that practice of the two-second edge.

We are looking to see if there is any other eli gaudi -- you legality.

Do you believe that there is il legality?

That is why there is an investigation.

Are the ones at fault the sec?

They have conducted a number of studies and concluded there is no wrongdoing.

Could this be a case of hate the game, not the player?

The sec has been looking at this.

I have been in touch with the sec.

The commissioner spoke very forcefully last week about it.

They need to change the regulatory structure.

We have 60, more than 60 private and public exchanges interlinked.

And in this race for speed, they try to use the milliseconds of advantage they have over other traders to front run the markets and i could manager of the cracks in the system.

The sec needs to look at new regulations, in my view.

They need to put some speed bumps in just to take away the arms race that needs to take chances for everybody to speed, but could have also -- but it was the sec who created this system that has the cracks in it.

It when i was back , they had way more control and could look at so much information.

They could control bid-ask.

In some ways it looks more fair than it was 15 years ago.

No, i don't think so.

It is good to look at high frequency.

Range -- and there are those folks try to take advantage of things to run the system.

If you can get information and michael lewis talks about this -- someone dumping a lot of, i think microsoft used as an example, and to know a few seconds before people can execute the trades, not even seconds, milliseconds.

The race for speed is inherently dangerous, because that leads people to take more and more chances to try to get advantage.


attorney general, you describe it as an arms race.

Is it by definition dangerous?

I ask this question does in just about every other industry in america, we celebrate technological advance, we celebrate the use of technology to build better mousetraps, except, it would seem, in the equity capital market.

Lewis says from his perspective -- and he is not the attorney general of the great state of new york -- but from what he can tell it is legal.

I think he is probably referring to federal law.

We have a different system here.

We look at new york to be a little different, mark eccentrics.

We have speed limits and airbags.

We celebrate technology, but you can cancel a credit card if they get stolen.

What we propose is in the way of speed bumps.

This is a new conversation.

I support this idea -- frequent batch auctions.

You of all of the trades up for one second, and then it is allocated by price.

Not whoever got in a few seconds earlier at a lower price.

That is the way to do it.

There is another exchange, -- iex?

-- iex?


I am a fan of the markets.

But i think michael is right.

We have lost a lot of credibility.

A lot of investors do not have confidence in the market and we need to regulate them to restore

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


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