SEC Prohibits Flash Trading in 5-0 Vote

While the world of trading securities is meant to be open to everyone and fair to all its participants, at least in a perfect world, critics have argued for a while that many large trading firms had an unfair advantage due to flash orders. These moves allow trading firms to freeze the order of an exchange for as long as half a second, which allows them to get a quick glimpse into the market and adjust their transaction accordingly.
 
SEC Chairman Mary Schapiro worried that flash orders could eventually create a “two-tiered market” in which long-term and short-term investors end up having conflicting interests. According to Schapiro, the interests of long-term investors are usually more important than those who are simply seeking to turn a quick profit.
 
When the proposal to ban these flash orders came to a vote, the SEC decided unanimously to uphold the ban, the first of several adjustments that the SEC will make to straighten up our financial system. The next order of business for the SEC is to do something about dark pools, which are electronic services that match orders anonymously.

Image: Flickr