Do we really need trades to be executed in microseconds?
I asked Mary Schapiro that question, and she agreed it is the central issue.
But she clearly doesn’t want to respond to the problems caused by speed with a series of policies born of, well, speed.
She’s totally aware of the law of unintended consequences, and she pointed out how hard it would be, from a policy standpoint, to “turn off the switch” that enables flash trading.
In addition, the SEC is stretched thin. It has 105 new rules to enforce from the Dodd-Frank financial reform legislation and 35,000 new institutions to cover because hedge funds will now fall under the agency’s purview. So, of course, the SEC'S budget and staff will grow commensurately, right? Nope. That's not in the cards these days in fiscally strapped D.C. That’s a travesty, because in many ways our capital markets depend on the confidence of individual investors like you. And if you’re not confident that the system’s rules are being enforced fairly, you’ll do the logical thing: You’ll sit on your investment checkbook until your confidence returns.
Mary Schapiro hasn’t been doing interviews since the flash crash in May, but she agreed to sit down with me, and I think it’s important for individual investors to know what’s going on in this area. This is an important story that doesn’t appear close to being resolved. I will keep you updated here in Investor Briefand on CNBC.