The arrest last week of Navinder Sarao for his alleged involvement in the Flash Crash rekindled questions about regulators’ ability to keep up with the technological tools deployed by modern market participants. Many people wondered… How come it took 5 years for authorities to catch Sarao?
But the story about the relationship between technology and financial regulation is not entirely one-sided. During the “Digitizing Wall Street: How Technology Is Changing the Future of Finance” at the 2015 Milken Institute Global Conference this week in Beverly Hills, panelists examined the ways technology and regulation can sometimes feed off of each other.
“Regulators’ challenge is that technological innovation happens extremely quickly. So the pace of change and development in the markets is faster than regulators can keep up with,” explained NASDAQ President Adena Friedman.
However, Darryl White, the CEO of BMO Capital Markets, countered that sometimes it is the kinds of regulatory reform that banks despise the most that end up creating data that makes the banks better. (read more…)
A few highlights and memorable quotes from Day Two of the 2015 Milken Institute Global Conference:
Pollster and message guru Frank Luntz on the importance of presidential contenders being able to connect with a crowd: “Barack Obama is the best teleprompter reader of all-time. John McCain? Stevie Wonder can read a teleprompter better than John McCain.”
Yahoo! Chief Information Security Officer Alex Stamos during a very informative panel on privacy and cybersecurity: “People talk about how we live in a “post-Snowden” world, but nothing has changed. None of the acts Snowden exposed have led to any legal changes in what the government can and can’t do. People worry about the pendulum swinging to far, but the truth is it hasn’t swung at all.”
Gene Sperling, former National Economic Advisor to Presidents Obama and Clinton: “If you are grading on a curve, then U.S. fiscal policy is an A+ because the stimulus worked. (read more…)
A few highlights and memorable quotes from Day One of the 2015 Milken Institute Global Conference:
Former Treasury Secretary Robert Rubin revealed that while he was in office he once had to explain to then-Federal Reserve Chairman Alan Greenspan that Jimmy Buffett was not the son of Warren Buffett. Apparently, Greenspan had no clue the Man from Margaritaville was not kin to the Oracle of Omaha.
Yasuhide Nakayama, Japan’s State Minister for Foreign Affairs, opened his comments during the Global Risk panel by apologizing that his English was not very strong. Nakayama explained that he taught himself English by watching movies like Beverly Hills Cop 1. Sen. Lindsey Graham then wise-cracked that he could understand Nakayama far better than one of their fellow panelist: Former British Prime Minister Tony Blair.
Bombardier Executive Chairman Pierre Beaudoin on the sometimes useless exercise of trying to predict geopolitical and economic trends and events. (read more…)
The circumstances surrounding the arrest of Navinder Sarao for his actions related to the Flash Crash have been covered widely, but there is one angle that seems to be slipping through the cracks: Sarao’s intent. Or more precisely, his lack of intent.
Considering the volume of trade orders Sarao is alleged to have placed and then canceled, it seems likely his intention was to manipulate the market. And if Sarao ever stands trial and it is proven that he was “spoofing” or manipulating the market in some other way, then he should be punished accordingly.
However, I find it hard to believe Sarao woke up on the morning of May 6, 2010, and said to himself, “Today I am going to crash the market, drive shares of Accenture to one cent, raise Apple shares to more than $100,000 and then call it a day.” In fact, his actions after the Flash Crash suggest he had no idea his trades played such an allegedly large role in the day’s events. (read more…)