Today’s financial markets can be summed up in three words – global, fast, and complex. But as the market structure evolves, so must the regulatory structure that oversees it. John Lothian News has spoken with several industry experts to create this series on the evolution of financial market structure.
In Part 1, industry spokesman Peter Nabicht appreciates the sudden interest in high frequency trading in the wake of Michael Lewis’ book “Flash Boys”, which alleges that U.S. markets are “rigged” in favor of certain participants. While open discussions are a positive and changes may be warranted, Nabicht cautions that changes may have unintended consequences.
Nabicht, senior advisor of the Modern Markets Initiative, an advocacy group focused on algorithmic trading, is no stranger to today’s markets. After spending several years as a programmer, he spent six years as the Chief Technology Officer at Allston Trading, a Chicago-based proprietary trading firm that uses high speed algorithms in its market making activity.
“I like the idea that “Flash Boys” has brought these issues to the public,” says Nabicht. The book made it understandable to a wide audience but, at the same time, ended up painting some issues with too broad a brush.” He says the book highlighted a number of conflicts of interest among brokers, and that Lewis also did a good job demonstrating that brokers that spend time on innovation do a better job representing their clients’ best interests.
Nabicht is quick to point out, however, that Lewis did not go far enough in explaining the role of high frequency trading in today’s markets. “To only talk about the negative confuses end users and lowers their confidence in the market.”