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Sen. Mark Kirk, R-Ill., who has expressed doubts that more regulation of high-frequency trading is needed, tried to make the point that the book had no input from one of the experts in the field.
Mr. Kirk had only one question for Mr. Griffin. Holding up a copy of the book, the senator wanted him to describe what he had told the “Flash Boys” author about high-frequency trading. “I’ve never spoken to Michael Lewis,” he replied.
“He never called you?” the senator asked again. “He did not,” replied Mr. Griffin.
Wounded by that oversight he might be, however, Griffin is much more concerned that someone (read: Elizabeth Warren) might try to do something drastic.
Pressed by another senator whether Congress should ban high-frequency trading, Mr. Griffin responded, “Absolutely not….”
However, Mr. Griffin pointed out that high-frequency traders serve a useful purpose by quickly acting on small discrepancies between options based on a group of stocks and the underlying stocks themselves. “Somebody has to keep the New York markets in line with the markets in Chicago,” he said. “It all happens at an extremely low cost in the context of our capital markets.”
There are, however, a few areas that Ken would like to see get a thorough cavity search and more.
He said off-exchange trading should be more regulated to make sure investors are treated equally and have the same amount of information about prices and volume, whether a trade is executed on an exchange or one of about 60 “alternative trading systems,” sometimes known as “dark pools,” set up by big banks and other large investors.
Mr. Griffin also said stockbrokers should be required to publicly report data on how well they execute trades so their performance can be measured.
Referring to the “flash crash” of 2010, when the Dow Jones industrial average plunged hundreds of points in minutes, Mr. Griffin said that brokerage firms “need to have solid and robust fail-safes.”
“We need to have broker-dealers and exchanges work hand in hand to prevent aberrant orders from having an undue and unfortunate — in fact, devastating — impact on investor confidence,” he said.
Ban high-speed trading? ‘Absolutely not,’ says Citadel’s Griffin [Crain’s Chicago Business]
At Senate Hearing, Wall Street Executives Share Concerns About the Market [DealBook]