4 Years After Meltdown, Wall Street Still Calling the Shots

The New York Times reports today that other countries are way ahead of us when it comes to regulation of high-frequency trading. So why are we so far behind? There are “many” reasons, says the Times. Let’s count them up:

There are many explanations for the slower pace of reform in the United States, including the crush of work the S.E.C. has had to deal with in completing regulations under the Dodd-Frank financial overhaul law. In addition, many of the largest American market participants, including the big banks, have built high-speed trading desks and dark pools and as a result have a vested interest in protecting them against new regulations.

Hmmm. That’s two reasons. And while I don’t doubt that the SEC is pretty busy these days, I’m going to go with Door #2 here. I think we all know perfectly well why no one is seriously trying to regulate HFT in the United States. Sure, we don’t really understand HFT — just like we never really understood all those synthetic CDOs and naked CDSs — and sure, there might be a big tail risk that could someday do worse than put Knight Capital out of business. But in the meantime, there’s money to be made! And who wants to get in the middle of that?

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