Wall Street’s biggest high-frequency trading guns are ducking for cover.
They’re taking more fire lately from proactive regulators seeking to eliminate abuses in the controversial HFT markets, pros say.
One HFT group that executes stock orders on high-speed platforms is scrambling to recruit a prominent sharpshooter to defend it in the corridors of power, according to Chris Nagy, CEO of KOR Group, an industry consultant. But it still hasn’t hired its recruit, he said.
Many of these formerly outspoken HFT gunslingers have quieted down in the long-simmering HFT shootout. Whoever goes up against the SEC and enforcement officials for them certainly has their work cut out.
“There are a lot of messes,” Nagy said, “from the enforcement perspective and rules that need to be clarified, to the long-term markets fixes.”
The New York Stock Exchange, though criticized for the plan, is proposing to abolish a dozen “order types” and is tinkering with others as part of the latest reforms.
Regulators are circling the wagons. BATS Global Markets is said to be nearing a regulatory settlement over allegations it unfairly favored certain high-speed customers. This follows the abrupt departure last month of its CEO, the combative Bill O’Brien.
“It really appears that BATS is coming in for probably some heavy fines or sanctions,” Nagy said.
New York Attorney General Eric Schneiderman and the SEC are pressing forward as some of the biggest dark-pool operators, including Goldman Sachs, Morgan Stanley, Credit Suisse and Barclays, are caught in the crossfire.
Rich Gates, a portfolio manager at TFS Capital in West Chester, Pa., expects to see regulators slam the brakes on some HFT players.
“I think we will see more changes,” said a jubilant Gates, featured in Michael Lewis’s “Flash Boys.” “It is exciting to watch and see all the changes and regulatory pressure.”