In the latest anti-HFT salvo, a 12-year veteran of Goldman Sachs Monday applied a new definition to the essence of high frequency trading, seeing it as a purposeful distortion of the flow of market information rather than just a successful trading technique. With that he also prescribed a financial transaction tax as part of a cure.
Dismissing claims that high frequency trading is a net positive for the markets, Wallace Turbeville told MNI Tuesday that transactions should be required to be held "20 seconds, 30 seconds," not millisecond or microseconds. "Something like the transaction tax would get at high frequency trading to a certain extent, maybe a transaction tax coupled with the requirement of exchanges to exact a small fee on all cancelled orders."
After years of studying HFT, he said, "I honestly don't see why it should be preserved at all." That echoed ECB Governing Council member Ewald Nowotny. Speaking at a conference on supervision and regulation late last year, he said high frequency trading "evidentially does not have any added macroeconomic value."
Therefore, he concluded, "There is nothing to regulate there, it simply has to be forbidden." Nowotny heads the National Bank of Austria.
In a massive treatise published Monday by the multi-national Demos non-partisan public policy research group, Turbeville argued that markets, far from being "big equilbrium machines" are actually complex dynamic systems like the weather, and prone to avalanches like snow on a mountain. And if high frequency trading and the distortions he says it is creating in market structure are not curbed, an avalanche is "inevitable."
