Ratterman: Equities Markets "Shining Example" of Reliability
March 15, 2010
The chief executive of a developer of lightning-fast electronic exchanges said Monday that equities markets are a "shining example" of resilience and efficiency, through the financial turmoil of the last three years.
Joe Ratterman, the chief executive of BATS Exchange, the creator of digital marketplaces designed to compete with the New York Stock Exchange, the Nasdaq system and other operators, told about 3,000 traders, rivals, media commentators and financial analysts in an email Monday that it was time for "our industry to go on the offense against those that would seek to regulate and/or tax the securities industry out of existence."
BATS, he said, is preparing a comment letter that will be addressed to the Securities and Exchange Commission that will argue that the United States has "the most efficient, fair, and transparent equity market system in the world" and that that efficient market is being assailed by "unsubstantiated outside attacks."
Letter argues:
Trading strategies should not be categorized and weighed against some kind of moral yard stick. Trading strategies are as diverse as are the individual personalities who trade and invest in the markets.
Co-location is not bad. As long as co-location is monitored for fair access related to all participants that want to put their decision making systems close to exchange systems, the practice provides both direct and indirect benefits for all market participants. Co-location reduces message latency, and as latency is reduced, so is trading risk.
An Alternative Trading System is separate and unique from an Exchange. Regulatory obligations, public quoting requirements and fair access provisions might be better implemented as a sliding scale based on the relative success (i.e. market share) each platform achieves.
High Frequency Trading (HFT) isn’t One thing, it's All Things. Today’s markets are simply more connected, more efficient, and handle more transaction volume that most people understand. Misguided attempts to regulate those basic elements that underpin the entire market infrastructure are likely to have long term, profoundly harmful ramifications on our capital markets.
The S.E.C. issued its concept release on changes in the structure of equities markets on January 14.
Bills introduced in the House and Senate also could wind up levying a "transaction tax' that would largely obliterate profits in the high-paced but low-margin world of algorithmic trading.
