December 29, 2015
Dear Members of the Commission, please allow me to submit a second comment.
I would like to use an analogy:
Allowing HFT to operate would be like allowing Judges to award court cases to the highest bidders.
HFT is paying exchanges to have preferred access against anybody else. That is not different from paying a judge to win a case, it is identical, only at ultra high speed.
And that is why, dear members of the Commission, that Liquidity has dried up since HFT took over the system, world has reduced trading of securities because they know they will be extorted by HFT.
So, what is Liquidity? What is Volume?
Let's say Jane and Jack are trading apples.
Jane sells one apple to Jack and Jack sells the same apple back to Jane. They keep doing that all day, let's say 1 million times per day and they can do that daily, without the need to supply new apples.
This is Volume, this is not Liquidity.
Jane and Jack are only recycling the same apple to each other.
Only when Jane and Jack keep producing apples, oranges, stocks, smart phones, bonds, clothing etc and keep trading them, then yes, that is Liquidity.
Liquidity = Abundance of goods, services, assets that change hands.
Volume = The total quantity of times all assets change hands.
Lack of Liquidity = Lack of goods, services, assets available for trading.
And that is precisely what HFT caused, it caused lack of liquidity, since bona fide players feel stabbed by HFT, just like a bona fide street food seller fears organized crime and wants the government to prevent it.
Esteemed members of the Commission, to conclude this comment, if you allow HFT to operate, you are basically telling the world that Judges can be paid to win a case in the financial system at ultra high speed. It is that simple.
World will never accept that deal. Bona fide players will slowly cop out of the system as it has happened thus far, seeing the Liquidity drying up.
It is my firm conviction that the rule of law must be reasserted into the financial system by slowing down HFT to the point that all players clearly see that the judge is impartial and needs no advance payment for proper functioning of the system, since each trade is an actual legal contract.
Thank you very much.