M a r k e t Sp e c u l a t i o n
interconnected. That means that other regulators around the
globe should have comparable regulations."
International coordination is the way to thwart market migration, Chilton said. In that spirit, he said, "We've delayed some of
our rules for six months in order to accommodate the European
Union, which should be coming online this year with fairly comparable regulations."
Much of the rest of the world is preparing market reforms as
well, Chilton said, "some sooner than this summer, some later."
With the U.S. and the European Union taking action, Chilton
said, "it's sort of like the movie 'Field of Dreams'—'If you build
it they will come.' If the E.U. and the U.S. do this, the rest of the
world will come online."
Chilton said, "I'm really optimistic that we're going to have globally harmonized rules and regulations in financial markets. That will
make these markets globally more efficient and effective."
High-frequency trading is another concern that needs addressing, Chilton said. He has coined the term "cheetah" for traders
who are operating 24 hours, 365 days a year, around-the-globe,
"trying to scoop up micro-dollars in milliseconds."
Chilton said, "I'm concerned they are impacting markets
in a way that is not helpful and that needs to be regulated."
Such traders constitute the majority of trading volume on the
exchanges, but they are not mentioned specifically in DoddFrank because they were not a contributing factor in the 2008
financial collapse, Chilton said. They came into the public
spotlight later. "There was a problem with them with regard
to the 'flash crash' of May 2010," Chilton said. ("Flash crash"
became the popular way to refer to a quick drop and recovery
in securities prices that occurred one afternoon in that month
of 2010.)
"No place in [Dodd-Frank] are they mentioned, yet these
traders are constituting the majority of the trading volume,"
Chilton said. "They're not even required to be registered with us,
which means that we can't request their books and records. They
should be registered."
Further, Chilton said, high-speed traders should be required
to test their programs before putting them into operation; their
programs should be required to have "kill switches"; and they
should not be permitted to engage in "wash trades" or cross-trading—trading with themselves.
"These are basic pedestrian steps that should be taken to
ensure that markets are better protected, and customers are better protected," Chilton said. l F O N
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