If you’re following the HFT Debate, you probably remember back in April when BATS President William O’Brien and IEX CEO Brad Katsuyama duked it out on CNBC over stock market exchanges and whether or not they are rigged to benefit HFT scalpers. O’brien starts out “Michael and Brad, shame on both of you,” adding that “they’ve possibly scared millions of investors in an effort to promote a business model.” Katsuyama says, “I believe the markets are rigged. And I also think that you’re a part of the rigging” (to O’brien).
Throughout the video, O’Brien is caught making misleading statements that the BATS exchange, which is the the country’s second largest exchange, gets its pricing directly from broker dealers and not from the NASDAQ’s SIP feed like Katsuyama claims.
Under pressure from regulators the BATS exchanged was forced to reverse O’Brien’s false claims and announced O’Brien’s departure from the company, effective immediately. This technical aspect of how trade orders are priced lies at the heart of the high frequency trader debate and is why big players can essentially see trades being executed and front run orders with faster speeds.
To follow up on my previous post in April, How They Rigged the Stock Market, we now know that O’Brien suddenly and immediately left the BATS exchange and the NY Attorney General, SEC and FBI are all investigating market manipulation, insider trading, fraud and numerous other illegal aspects that come with HFT market rigging. The target of investigation seems to be some of the largest and most trusted investment firms in the country, which poses the question: why would anyone keep their life savings in stocks or stock related funds?