The markets have become “highly, highly influenced” by program trading, Dick Grasso told CNBC Thursday.
Using computers, hundreds of stocks can be traded in fractions of seconds and for far less than the old margin costs. Grasso, former chief executive of the New York Stock Exchange, said margins in fractions of cents can “incentivize a lot of uneconomic trading.”
There are many parts needed to repair and mend confidence and integrity in global markets. High frequency trading at a fraction of a penny spreads are one of the big risks that needs to be addressed. One of the ways to do this is to increase transaction costs via a tax on certain types of speculative trades. This will help to slow down the insane amount of high frequency, machine generated transactions running some 70-80% of the volume in our markets today.
An added transaction tax is NOT THE PANACEA OR ONLY CHANGE NEEDED, but it is one of the steps back toward more rational markets. Commonly held assumptions that such taxes would be impossible to design and levy, create market distortions and damage economies are simply not backed up by the latest available evidence.
We have got to stop rejecting ideas because they are not perfect, or not the end all be all needed. No one thing is the solution here. The fact is that the theme of lower transaction costs has now run too far. Trades should not be next to free. There is a cost to our system when it is allowed to devolve into a wild west of reckless speculation. The high frequency traders may be paying a fraction of a penny per share, but those trying to use markets for investment are paying for this service to “traders”. We cannot afford to allow this to continue unchecked.
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Hey Dick Grasso, nice financial parachute $188 million. I wish my employer would pay me that kind of money to fire me. Another financial correction is the chairman of the board should not control who is on his board just like S&P should not operate under a payola system. Buy a nice wig chizler.