Dave Michaels reports: The Nobel laureate economist Joseph Stiglitz who called for a tax on high-frequency trading, has been blocked from a government panel that will advise regulators on issues facing U.S. equity markets.
Democratic Commissioner Luis Aguilar had pushed for Stiglitz, who has said high-frequency trading isn’t good for financial markets and should be curbed, possibly through a tax.
“I think they may not have felt comfortable with somebody who was not in one way or another owned by the industry,” Stiglitz said in a phone interview.
White said Jan. 3 that she will announce the members of the advisory market-structure committee in the coming days — six months after she first proposed the idea together with a blueprint for renewed market oversight. Each of the five commissioners — two Democrats, two Republicans and White, an independent — was allowed to nominate one person to the panel. The commission then had to come to agreement on the final list, which is expected to have more than 15 members.
Stiglitz, 71, wasn’t the only nominee that sparked wrangling. Earlier in the process, SEC Commissioner Michael Piwowar, a Republican, opposed the involvement of TIAA-CREF Chief Executive Officer Roger Ferguson. Ferguson, whose firm manages hundreds of billions of dollars in retirement savings, is a former Federal Reserve vice chairman. He is married to former SEC Commissioner Annette Nazareth, who now advises some of Wall Street’s biggest banks on regulatory issues.
The panel is expected to include representatives of Wall Street brokerage firms and academic researchers. IEX Corp. Chief Executive Officer Brad Katsuyama and former Senator Ted Kaufman of Delaware are expected to be named to the panel, two people with knowledge of the matter said.
Katsuyama started the IEX trading platform with the aim of leveling the playing field for investors by curbing the pace of buying and selling — eliminating opportunities for the fastest firms to trade in front of slower ones. He has said the government should consider forcing greater transparency of trading venues’ operations.
High-frequency trading, which uses computer algorithms to buy and sell large numbers of shares in fractions of a second, accounts for more than 50 percent of U.S. trading volume.
The dust-up over Stiglitz is emblematic of the frequent conflict among commissioners that has slowed progress on regulatory policy and enforcement matters under White. A recent case against Bank of America Corp. was stalled for three months as commissioners, divided along political lines, fought over additional penalties that could have expelled the bank from the profitable business of raising money for private companies.
A former chief economist of the World Bank Stiglitz argued in an April speech that high-frequency trading can make markets less efficient while driving other investors to cloak their orders by placing them away from exchanges using dark pools, leading to less transparency.
