The godfather of quant finance, Jim Simons, joins a number of high frequency trading firms who have been lobbying Washington for relaxed regulations recently.
Bloomberg today has a great breakdown of which HFT firms are giving money, who they’re giving it to, and what they’re getting in return.
The news is sure to freak out some market participants, who want nothing more than tight regulations or, preferably, no HFT at all.
The HFT firms lobbying Washington include: Getco, Hard Eight Futures, Quantlab Financial, Allston Trading, Infinium Capital Management, Tradelink, Hudson River Trading, and Traditum Group.
“HFTs are beginning to act more like Wall Street banks,” exclaims Bloomberg.
And the people they’re paying off include: Eric Cantor, the second highest-ranking Republican in the House (who Simons gave $1,400 to); Representative Jeb Hensarling, a Texas Republican who sits on the House Financial Services Committee; Representative Spencer Bachus, the Alabama Republican in line to become chairman of the financial services panel; Mark Kirk, a Republican who won a U.S. Senate seat in Illinois; Senator Charles Schumer, a New York Democrat, Representative Melissa Bean, an Illinois Democrat, and Alex Sternhell, a former aide to Senate Banking Committee Chairman Chris Dodd.
In return for their dime, says Bloomberg, the HFTs get letters written, seemingly on their behalf, to industry regulators like Mary Schapiro. Here’s an example.
[Cantor sent Schapiro] a letter saying her agency’s ideas for regulating fragmented, electronic markets, including a proposal that would prohibit exchanges from giving high-frequency traders and other market participants a split-second peek at stock orders, “appeared ad hoc in nature.”
In another instance, Hensarling and Bachus, two representatives who received money from HFTs, sent an email to Schapiro that said, get a better understanding of what caused the crash before “assigning blame to algorithmic or high-frequency trading firms.”
What this all means is that HFTs are becoming more legitimate on Wall Street. They’re lobbying in Washington, hiring regulators, and asking that their concerns be heard. They’re also taking on the nay-sayers in the press and in the Senate.
One person fighting on the other side of the HFT, for example, is Senator Ted Kaufman, who has been lobbying for tighter regulation of HFTs for some time now.
HFTs finally being heard in Washington is the individual trader’s worst nightmare.
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