Last week the Wall Street Journal wrote an article on the SEC‘s efforts to ban “naked access,” which is a system whereby big stock traders are given direct access to brokers’ computers so that they can trade faster. The SEC fears that this could be destabilizing to markets. Wall Street says that naked access improves liquidity. They also say that “high-speed trading firms are sophisticated and have risk-management tools that limit the likelihood of destabilizing trades.”
Haven’t we heard that song before? Wall Street said that they were sophisticated traders of mortgage-backed securities, and that their risk-management models would keep them from getting in trouble. We know how that turned out. I’m no expert on naked access, but I know that when Wall Street says “trust us,” I make sure they haven’t just stolen my wallet.
Along the same lines, here is an article in Slate describing how Wall Street has always complained about regulations that ended up helping the industry.