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Treasury and SEC Flying Blind While Computers Drive Wild Market Swings

FOR IMMEDIATE RELEASE
Wednesday, December 26, 2018
Contact: Nick Jacobs, 202-618-6430 or njacobs@bettermarkets.com

 

Washington, D.C. – Dennis Kelleher, President and CEO of Better Markets, issued the following statement in response to increasing speculation about the impact of computer trading on the stock market swings and precipitous drop:

“Treasury Secretary Mnuchin along with many others have complained about computer-driven, high-frequency algo trading making the latest market drops, swings and volatility worse.  The Wall Street Journal joins the parade this morning with a front-page article on computer trading.

“This is all wild and baseless speculation and rumors, primarily due to the dereliction of duty by the Treasury Department, Securities and Exchange Commission (SEC) and the Financial Stability Oversight Council (FSOC), which Treasury Secretary Mnuchin chairs, to use modern day technology to gather comprehensive data and use cutting-edge analytics.

“’Dereliction’ because, since the Flash Crash of May 2010, everyone knows that elected officials, policy makers and regulators have no comprehensive, real-time, data-based knowledge of what is happening in the equity markets. Proving that, it took a lengthy investigation by those officials to come up with a reason for the Flash Crash, only to be proved wrong a few years later. 

“The long-standing, well-known solution to this is a comprehensive, real-time data gathering supercomputer called the ‘Consolidated Audit Trail’ (CAT) that would enable the SEC and other regulators to see and analyze all equity trading.  The simple idea is to provide regulators with the same modern-day technology and tools that the high-frequency trading firms use, but the SEC would use it to monitor, supervise and police the markets.

“The CAT has been on the SEC’s drawing board for years but riddled with industry conflicts of interest and inexcusably deficient oversight with no accountability.  As we have detailed for years, the CAT would enable regulators to know what is happening in our markets and stop predatory conduct and market manipulation.  Given this is where tens of billions of dollars in industry profits come from, it is no mystery why the industry has effectively killed the CAT.  That’s why it is past time for Treasury Secretary Mnuchin, the FSOC and SEC to ensure that the CAT gets done before the next Flash Crash or inexplicable market moves.”

 

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.com.

 

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