Mark Cuban’s disdain for high frequency trading (HFT) is no secret, and today, as the SEC discusses ways to ensure that it does not create more volatility in the market, Cuban has a platform to speak out about the issue.
Actually, “speak” doesn’t do Cuban’s CNBC spot justice. He comes out swinging against pithy reforms that he believes would do nothing to curb the dangers of HFT (like kill switches) and says stock exchanges are to blame for all of this.
Check out the quote below:
It’s really just the NYSE protecting their own… they’re the root of this problem despite the fact that people don’t want to admit it….they’re a for-profit entity now as opposed to being a non-profit entity in the past and they’re doing what every for-profit entity does — They’re trying increase their sales protecting their best customers and to do this they’re creating all these different kinds of order types. How many order types do you need? Well in the case of the NYSE and other exchanges they create as many as they can to try to get more algorithmic trading to try to enhance more volume and even to pay for that volume… The root of the problem is what’s going on at all the exchanges and all the algorithmicly driven trading is just a symptom of that.
So what does Cuban think we should do about all of this?
- You can pare it at the edges with measures like kill switches which “do nothing.”
- Or you say, “we’re done, there’s no investor confidence… maybe you go back and change the rules and make these exchanges non-profit again, though I don’t know how you’re going to do it.”
Bottom line: Cuban says we have to do something or we’re going to see something much worse than a Knight Capital or a 2010 Flash Crash. “There’s no such thing as bug free software,” he said.
“When you have algorithms trying to out battle other algorithms to to get a trading edge there’s no way to know what the results will be… There are more trades that happen in the blink of an eye…that’s just the reality of technology. And they’re trying to make it faster.”
Watch the video below: