Once a bastion of indie cred, the high-frequency trading industry is now shedding its cool underground status in favor of openly paying politicians in hopes of avoiding a regulatory crackdown. Following last week’s midterm elections, the impact is already being felt. Bloomberg reports:
Closely held companies with undisclosed profits and obscure names like Getco LLC, Hard Eight Futures LLC and Quantlab Financial LLC, are beginning to act more like Wall Street banks, cutting checks to politicians, forming trade groups and hiring lobbyists and ex-regulators. […] The top recipients include Eric Cantor, set to become House majority leader, and several incoming senators who won in last week’s Republican rout.
To say the least, Cantor’s accrual of high-frequency firms’ money — $23,000 since last year, according to Bloomberg — casts some of his statements about market reform in, shall we say, a new light. He has called SEC head Mary Schapiro’s proposal to prohibit high-speed traders from getting split-second advantages in receiving price quotes “ad hoc” and said that regulators shouldn’t be so hasty in blaming high-frequency trading firms for disruptions like the May 6 Flash Crash.
The report emerges after the Securities and Exchange Commission banned “stub quotes,” bids and offers for stocks that are far away from their most recent trading price. We’ll see whether these firms can heap enough money on politicians to overcome their reputation as shadowy evil robots who can destroy the stock market. They probably can!
mtaylor [at] observer.com | @mbrookstaylor