Brad Katsuyama’s crusade against high-frequency traders on Wall Street isn’t winning him any friends in Washington.
Katsuyama, CEO of stock trading upstart IEX and the hero of Michael Lewis’ bestselling “Flash Boys,” ruffled feathers this year by proclaiming that the markets are rigged and luring business away from bank “dark pools.”
While his reputation as a reformer puts him in a position to help curb potential market abuses and level the playing field for investors, he’s also solidifying his status as an outsider.
The biggest players in high-frequency trading on Monday will meet with lawmakers to give recommendations for how best to govern the markets at a time when high-speed, computer-driven trading is under fire. The one notable omission: IEX.
The roundtable discussion, chaired by Rep. Scott Garrett (R-NJ), comes after a tumultuous few weeks, with New York Attorney General Eric Schneiderman suing Barclays for allegedly lying to investors about the presence of predatory high-frequency traders lurking in its dark pool trading platform.
“It was not a deliberate omission,” Maggie Seidel, a spokeswoman for Garrett, insisted to The Post, noting that the congressman has met with Katsuyama “a number of times.”
Garrett, chairman of the House Financial Services subcommittee on capital markets, invited execs from 18 firms that touch on every aspect of high-frequency trading, from brokers Citadel and Virtu to exchanges like Nasdaq and BATS.
Bill O’Brien, the ex-president of BATS, left his job last week after Schneiderman’s office and the SEC pressured him to step down following a televised fight with Katsuyama, in which O’Brien mistakenly claimed there was no difference in the speeds of BATS data feeds, according to two people told of his departure. Neither BATS nor O’Brien would comment.
Garrett’s panel won’t touch on the main thesis of Lewis’ book — that some traders wield ultra-fast connections essentially as surveillance on the market, bidding up prices before others can get to it. Instead, it will focus on fees, pricing feeds and other trading technology.
“Mr. Garrett agrees with [SEC] Chair Mary Jo White, that the markets are not rigged,” Seidel said. “He believes they are the best markets in the world.”
In testimony before Congress this year, White denied that the markets are rigged — while calling for greater oversight of less regulated dark pools and high-speed trading.
Garrett’s district includes Mahwah, NJ, where the New York Stock Exchange keeps its data center. NYSE and other exchanges allow traders to “co-locate” their servers in order to shave off milliseconds for trade times.
The majority of Garrett’s campaign donations, $1.2 million, are from the financial services industry, according to OpenSecrets.org.
Despite the snub, Katsuyama and other IEX execs plan to attend Monday’s roundtable as onlookers, a source said. IEX declined to comment.