Tags: Cuban | NYSE | high | frequency

Mark Cuban Rips NYSE for High-Frequency Trading

Wednesday, 03 Oct 2012 08:47 AM

By Dan Weil

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Instead of solving the problems of high-frequency trading, the New York Stock Exchange is fostering them as it seeks profits for itself, says billionaire investor Mark Cuban.

“It's really just the NYSE protecting their own,” he tells CNBC. “They're the root of this problem despite the fact that people don't want to admit it.”

High-frequency trading (HFT) triggered the Flash Crash of May 6, 2010, in which the Dow Jones Industrial Average plunged 600 points in five minutes. HFT also nearly led to the demise of Knight Capital Group in August.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

As for the NYSE, “they are trying to increase their sales, protecting their best customers, and to do this, they're creating all these different kinds of order types,” Cuban says.

And HFT is one of those types.

“[T]he NYSE and other exchanges create as many as they can to try to get more algorithmic trading to try to enhance more volume and even pay for that volume,” Cuban says.

The real issue is the business model for financial exchanges, he maintains, and HFT is just a function of that.

Ironically enough, HFT traders themselves aren’t running around trying to assure everyone that what they’re doing is safe.

They’re just as scared of a crisis like the one that Knight Capital encountered as anyone else is. "It's terrifying," Mark Gorton, CEO of Tower Research Capital, tells The Wall Street Journal. "Everyone's sitting there saying, 'This could happen to me.'"

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

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