Regulatory debates are often so filled with misleading hype and special pleading that one despairs of any truth being found. The controversy over flash trading of options is a refreshing exception.
The flash trading debate has shown the derivatives market in a good light.
Position papers arguing against the proposed ban on flash trading of options, signed by the CBOE’s Bill Brodsky, Michael Simon of ISE and the Boston Options Exchange’s Tony McCormick, have dissected this issue with forensic precision.
All are anxious to avoid a regulatory clampdown that would hurt their interests, and which they maintain would also damage the market as a whole. Not just market intermediaries would suffer, they claim, but also end users of derivatives – in this case, retail investors.
So far, so familiar. Every time a law or regulation threatens companies’ freedom to make money, these are the terms in which they couch...