The SEC is going to ask HFT firms to register as broker dealers. I don’t think that is right, nor is it close to any sort of solution. The problem isn’t HFT. The problem is market structure. Registration only adds to costs. It doesn’t do anything for the market.
Besides, a lot of the HFT world isn’t brokering anything. All they are doing is trading.
The SEC is correct in targeting dark pools. They fragment the market, and they are bad for market structure. While she is at it, why not ban pay for order flow, internalization and the rest of the practices in the SEC world that are damaging to markets.
It doesn’t matter that HFT is the largest percentage of order flow in any market. That’s the way things progress. But, level playing fields do matter and the SEC exchanges don’t have one today.
I’d much rather see the SEC and CFTC deregulate and allow more exchanges to get started and compete. The industry would sort it out. Commodity exchanges especially are vertical silos that could be unbundled.
I think registration is putting the wrong foot forward, and very typical of how a regulator thinks.
