‘The market is rigged’ – Michael Lewis – BBC News 04-10-15

Salient to Investors:

Michael Lewis said:

  • Charles Munger says high-frequency trading is the functional equivalent of letting a lot of rats into a granary.
  • Electronic trading has rigged the market against ordinary investors, particularly in America, by allowing high-frequency traders to front run institutional investors and skim billions of dollars from the market.
  • Screwed up behavior is normal, even praised because it increases profits, while new regulation is uncertain because of the revolving door between Wall Street banks and HFTs and the regulators.
  • Perverse incentives means that culture change in financial services is glacial at best.
  • The IEX seeks to eliminate predatory opportunities created by speed and counts its biggest source of orders is from Goldman Sachs.

Rebecca Healey at Tabb Group said many market participants have already adapted trading strategies to deal with HFT constructively and automation delivers choice and fosters lower commissions for investors.

High-frequency trading accounts for 30% of business on the UK equity market.

Read the full article at http://www.bbc.com/news/business-32246655

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