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SEC urged to analyze effects of high-speed computerized trading

SEC urged to analyze effects of high-speed computerized trading

The U.S. Securities and Exchange Commission (SEC) is currently looking to increase its data-gathering capabilities, following criticism that it has fallen behind the times and can no longer adequately foresee coming crises, due to the rapid development of high-speed trading directed by computers.

Such trading has come to account for over 50 percent of U.S. equity volume, according to research firm Tabb Group. This figure is up significantly from 2007, when high-frequency strategies constituted 35 percent of total trading activity.

Gregg Berman, who is set to head up the SEC’s new office of analytics and research, told Bloomberg BusinessWeek that the point of increasing the commission’s scrutiny of modern trading methods is to determine how the organization can act as an effective risk mitigator for the trading system.

“What we will focus on is trying to shed more light on some of the big outstanding questions about market structure,” said Berman.

He went on to suggest that the key to effective regulation is to ask the right questions and realize that even comprehensive data collection doesn’t reveal all the answers.

“The art of quantitative analysis is knowing what you’re supposed to plot on the X-axis versus the Y-axis so it actually reveals something interesting and actionable,” Berman told Businessweek. “It’s about knowing when the result tells you something real and when it’s just an artifact of the data. Sometimes quantitative analysis requires serious math and writing computer programs that go through a complex algorithm, but not always.”

Berman’s explanation underscores the fact that navigating modern financial markets can be incredibly complex in the fast-paced economy of the 21st century. Working with an interim investment analyst can help companies ensure that they are making smart decisions with their money.

ExecutionistSEC urged to analyze effects of high-speed computerized trading