downloaded from CNBC
A number of you have been asking my views on a couple of subjects
that I am comfortable in going on the record, because they are not
related to my case. there for(sic) the following are remarks that you
are free to use for whatever value you feel are appropriate.
The issue of electronic trading has recently been focusing on
the lack of transparency of the markets with the emergence of DARK
POOLS.
This has now spread to the recent acquisition of the NYSE .
While I have always been an advocate of electronic trading due to the
efficiency the lower costs they bring o the markets, I am nit (sic) a
fan of the lack of transparency the DARK POOLS create.
It is important to examine why there has been this growing
interest in the use of dark pools. Markets have always focused on the
speed with which information becomes available. Of course this
information can be composed of various types.
It could be corporate developments like earnings or mergers or
it can be information regarding the placements of buy and sell orders
and who is placing these orders. It is the latter information that has
created the interest in the dark pools.
Institutions have always attempted to guard this buy and sell
information from exposure to the market for fear of being FRONT RUN.
Certainly they are entitled to have this right of confidentiality.
This being said, the more secret this information. The more
valuable this information is to those that can obtain it. Therein lies
the problem. It is naive to think that there will be no leakage of this
information.
Although one would be lead to believe that with the recent spate
of Insider trading prosecutions, that insider trading is a new
development. This is false. It has been present in the market forever,
but rarely been prosecuted. The same can be said for front running of
orders.
The other area of discussion involves the growth of hedge funds,
particularly feeder funds. In spite of the early held belief. of which I
was of this opinion, that the extra layer of costs related to
commissions and profit sharing that went along with feeder funds.
They have continued to grow. It has been this additional layer of
costs that have created the need for more risk to be taken to earn
worthwhile returns. This has created a minefield of regulatory problems
involving the very reasons that the desire for a lack of transparency
has grown.
Both of these areas are going to be the greatest challenge that both the industry and the regulators are going to face .
Subscribe to:
Post Comments (Atom)
Posts
No comments:
Post a Comment