If a trader spends large amounts of money to get a proportionally small amount of alpha, is that successful or inefficient? Brian Mannix, a George Washington University professor referred to on page 174 of "Flash Boys," recently wrote an article on TabbFORUM about the inefficiency of high-frequency trading that drew a fair amount of comments both for and against his argument. Whenever an article sparks a healthy back and forth of debate, it's worth looking at in more detail.
While speaking at the Options Industry Council last week, the Securities and Exchange Commission's Gregg Berman defended the regulatory agency from critics and "maybe an attorney general" who might think "regulators are very behind the times and can't keep up with market participants," according to Bloomberg.
Last week a Reuters exclusive reported that Morgan Stanley has sharply adjusted compensation for financial advisers who make money "riding the calendar" of new stock and bond issuances. In other words, the firm is apparently cutting compensation for brokers when more than 70 percent of a client's business comes from sales of new issues.
A paper released earlier this month makes some interesting predictions about the future of financial services. The same technology eroding some of the traditional ways financial firms provide services and profit from risk might also be a key differentiator in a reconfigured market.
As the world is absorbed with the speed of high-frequency trading and how the structure of today's markets affect the capital formation process, a speech was being delivered at MIT's Sloan School of Management that looked at capital formation from another angle--starting small.
In today's fast moving markets, predatory traders drive Ferraris and regulators try to keep up on bicycles.
Last week we profiled New York Attorney General Eric Schneiderman's efforts to crackdown on the millisecond time advantages that high-frequency traders are allegedly able to buy for themselves in the markets. Over the course of this past week, the glare cast on certain high-frequency trading predatory practices gained more wattage thanks to the release of Michael Lewis' new book "Flash Boys" and an accompanying 60 Minutes exposé.
New York Attorney General Eric Schneiderman has been clamping down for months now on the ways that high frequency traders buy themselves millisecond time advantages in receiving market moving information. Last week, he implied that through co-location and other techniques, U.S. stock exchanges and marketplaces might be complicit in the problem.
A recent survey found that the cost of compliance can increasingly be measured in a new way: personal liability. Fifty-three percent of compliance officers feel that their personal liability has increased according to a Thomson Reuters survey of 600 financial services compliance officers.
Just as the promise of good customer relationship management is the ability to paint a complete picture of the customer, a similar approach is developing in the area of fraud. It turns out, marrying big data and fraud prevention may involve applying some of the techniques associated with savvy target marketing toward identifying false identifies and other types of scams.