Juggling Dynamite

In a speech in Texas on Wednesday, CFTC Commissioner Bart Chilton called for high frequency traders, or “cheetahs” to face so-called kill switches that would shut down a broker dealer’s trading over erroneous orders or technology glitches. He said the SEC and CFTC’s efforts to create safeguards on electronic trading would help prevent damage to public markets and a repeat of events such as Knight Capital’s $440 million trading loss and the May 2010 Flash Crash. See: Kill switches may be too difficult to implement

“In September, the Securities and Exchange Commission held a roundtable with industry participants to discuss ways to promote stability in the markets. Some of the participants said errors from high frequency trading are inevitable because of the speed at which the trading is conducted. But Chilton said executives in high frequency trading firms should be accountable if their firms report false and misleading information.

“If there is another flash crash where people are damaged (they lose money) due to a rogue cheetah, I think there need to be steep consequences. And when I say consequences, I’m talking not just for the firm, but for individuals at the firm. If the cheetahs want to be involved in the high-flying, incomprehensible gambling world, okay, but if you cause harm to markets and consumers, we shouldn’t stand for it,” he said.

Chilton said in his speech that violations committed by high frequency traders should be penalized by the second.

“Under our statute, we can fine a miscreant $140,000 per violation — and that used to be sufficient. That dollar figure made sense in yesterday’s world of human-to-human trading. But it doesn’t work in these markets,” Chilton said.”

The Bubble: A chronicle of credit is the economic story of our times, from the federal deficit crisis of 1995 to the dramatic growth of household debt to historic levels today. Did government help or hurt the nation with 0% down payments and easy financing? This episode looks for answers. Here is a video direct link.

This story begins with the last time Canada became serious about resolving its federal deficit and debt problem in 1995. Remarkably, back then Canada was in a minority globally with 70% debt to GDP. Today most developed countries have debt levels that are similar and higher than this. It is also worth noting that in order to break the over-spending addiction back then, Canada had to make cuts across the political spectrum including the military, arts, education and health care. It is also important to realize that while Federal Canadian debt is a lower percentage of GDP today than in 1995, provincial and consumer debts are much, much higher. Canadians have some serious fiscal slogging ahead as we work our way back out of our present debt hole.

Separatists are gaining ground as Europe’s economic crisis deepens, but will movements in Spain, Scotland and Belgium mean more national flags on the map? Here is a direct link to the video.