SEC's Schapiro: Ban on Flash Trading Will Take Time
A regulatory ban on so-called flash trading, which gives some big brokerage firms a split-second advantage in buying and selling stocks, will take time to implement, Securities and Exchange Commission Chairman Mary Schapiro told CNBC.
Sen. Charles Schumer's (D-NY) said Tuesday that such a ban by the SEC was "imminent," but Schapiro downplayed that idea in the interview.
"I have talked to the major market participants, investors and the senator, so we are going to look at all the inequities that occur, but it will take some time to make this happen," Schapiro said. "There's a very good argument that it's brought liquidity to the markets. We have the balance the good and the bad. But I believe we are headed [a ban] in that direction."
Flash trading gives certain members of exchanges—including Nasdaq, Direct Edge and BATS— the ability to buy and sell order information milliseconds before that information is made public. High-speed computer software can take advantage of that brief period to allow those members to get better prices and profits. (Click here to read more about the practice)
"We have concern about whether we developing a two tier market where some people have access to more information than others do," said Schapiro. "We are looking into whether they [practices] should be permitted and we'll go through a process as we have to, at the SEC to deal with that."
"My real concern is what kind of transparency should there be post trades,' Schaprio added. "Our guide posts in all of this will be investor protection."
Schapiro said the SEC is also looking at so-called dark pools, a method through which large Wall Street brokerages make deals away from the markets, Schapiro said there's no decision yet on whether to ban them.
"I think the jury's out right now on them on whether they are appropriate," said Schapiro. "I think there is a need for anonymity in some cases."
As for reinstating the uptick rule, which requires that every short sale transaction be entered at a price that is higher than the price of the previous trade, Schapiro again said there's no decision yet. "We are still hearing from investors on the uptick rule and circuit breakers," Schapiro said. "But I would like to resolve the short shelling issues by the year's end."
Asked to comment about the reported tirade of Treasury Secretary Timothy Geithnerto her and others at a meeting last week about not supporting the Obama administration's plan for regulation reform, Schaprio said that eventually everyone would be on board together and the differences were minor.