Joseph Stiglitz, a Nobel Prize winning economist and vocal critic of the effect of high frequency trading, will not be included on a Securities and Exchange Commission Panel on high frequency trading (HFT) and dark pools, according to Marketwatch. Some believe that the SEC is excluding those who are critical of HFT. Stiglitz believes that HFT should be hit with a special tax, according to Marketwatch, to make it seem a less viable way of making easy money.
HFT has been seen as an obstacle to the ordinary investor, as those with resources and influence can make machine trades in milliseconds. HFT has also been criticized for causing added volatility to the market, driving up and down stocks at a lightning pace. It was to blame for the “Flash Crash” and was the subject of the popular book “Flash Boys, ” in which the author, Michael Lewis, presents the market as rigged in favor of HFT players.
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Also under discussion are dark pools, or exclusive trading venues run by financial institutions for their clients. This allows some HFT to gain information that would allow them to front-run the orders of other investors.
Some argue that Stiglitz is not on the panel because of his position against HFT, but Marketwatch points out that Brad Katsuyama, one of the biggest critics of HFT, is expected to be included. Christopher Nagy, founder of KOR trading group, thinks the reason Stiglitz is being passed over is because he doesn’t work on a day to day basis with financial markets, “What we’ll end up seeing is the committee will be comprised of some exchanges and some firms that deal with the market daily.”
