Commodities Futures Trading Commissioner Bart Chilton proposed on Wednesday a transaction fee on speculative trading that would slow high frequency trades and fund his agency's regulatory efforts.
Chilton announced his proposal on CNBC's "Squawk Box." It calls for a fee of 0.06 of a cent on futures and swaps.
"There are so many trades going on at lightning speed. They're scooping up micro-dollars in milliseconds," he said. "[A fee] maybe will make them a little more thoughtful about the trades that they're making."
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Referring to them as "our fine furry friends, the cheetahs," Chilton said he wants to keep high frequency traders in the market, likening them to the "new version of the floor trader and the new middleman."
But he also raised some concern. "If they're only holding liquidity for two or three seconds, and we're not transferring any risk, I'm not so sure that's valuable to markets."
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He stressed that his proposed transaction fee would only impact "speculative trading, not the end-users, not for folks that have skin in the game."
"We could [also] fund $300 million a year, which is what our agency needs to look after these, as [Warren] Buffett says, 'the financial weapons of mass destruction' and to get after an unprecedented level of malfeasance in the financial sector."
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Fake Tweet Fallout
The fake AP tweet last week that sent stocks sharply lower on program selling before quickly recovering put the issue of social media and the markets "on our radar," Chilton said.
The hack of The Associated Press Twitter account came just weeks after the Securities and Exchange Commission said that companies can use Twitter, Facebook, and other social media to announce key company information as long as they alert investors about which sites they plan to use for such disclosures.
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Chilton explored the worst-case-scenario: "If there is a company that's a registrant, somebody that's trading, whether or not it's in the equities world or the futures world, and somebody hacks in and, say, produces something bogus before an earnings report or something, it could really impact markets."
"I think we need to insure that we have super-sized cybersecurity at trading firms," he added. "Now whether or not that means a regulation, I'm not down with that yet, but it's certainly an area of concern."