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1: Are the Markets Rigged?

September 13, 2016

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There’s an undercurrent in our mainstream culture today, a prevailing sense that our financial markets are rigged. This zeitgeist has existed very strongly since the crash of 2007/08. Some may know very little about how the markets operate and yet they tend to harbor at least a seed of doubt: “Maybe the markets are rigged – I would believe it if they were.” Others, who are more fluent in the language of the markets – for example, a hugely popular former presidential candidate, a best-selling author, various politicians and regulators, and even many market participants themselves – say regularly and emphatically that the markets are rigged or at least that they constitute an un-level playing field. We wanted to make sense of this question and see whether there’s a clear answer...

Sponsored by:

Haim Bodek: Haim Bodek is a Managing Principal of Decimus Capital Markets, LLC, a tactical consulting and strategic advisory firm focused on high frequency trading and U.S. equities market structure. Mr. Bodek was formerly a founder and Chief Executive Officer of Trading Machines LLC, an independent high frequency options trading firm. Prior to his tenure at Trading Machines, Mr. Bodek was a Managing Director and Joint Global Head of Electronic Volatility Trading at UBS. He is an electronic trading executive and algorithmic trading strategist with over 15 years of experience in the automated trading space. Mr. Bodek's career, experiences, and advocacy for regulatory reform of securities markets are described extensively in Dark Pools by Scott Patterson, a freelance writer and staff reporter for The Wall Street Journal. Mr. Bodek is also the subject of the documentary film The Wall Street Code directed by Marije Meerman. 

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Bill Harts: Bill Harts is the CEO of the Modern Markets Initiative, the industry advocate for electronic and high frequency trading firms. He is known in the financial services industry as a pioneer of algorithmic trading as well as an authority on financial market structure and applied technology for trading. As Managing Director and Head of Equity Strategy for Bank of America Securities, he was responsible for development of the firm’s electronic and algorithmic trading businesses, including its industry-leading Electronic Algorithmic Strategy Execution, InstaQuote direct market access product, and the Quantitative Strategies research group. He was Chairman of the Bank’s NYSE Specialist business, guiding it through an especially tumultuous reinvention process. Prior to joining the bank, Mr. Harts held the position of Executive Vice President for Corporate Strategy for The NASDAQ Stock Market, Inc. Mr. Harts created the industry’s first fully automated market making operation for Salomon Smith Barney/Citigroup, and was head of the Global Program Trading Department with responsibility for desks in New York, London and Tokyo. Prior to that, he was a consultant to Goldman, Sachs & Co. for three years with Fischer Black in their Quantitative Strategies Group developing equity derivative trading systems. Mr. Harts was a member of the SEC’s Special Advisory Committee on Market Information and a member of the Nasdaq UTP Advisory Committee. Mr. Harts served as a Director and Vice Chairman of the Board of the Philadelphia Stock Exchange from 1994 through 1999. The Modern Markets Initiative 

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Senator Ted Kaufman: Ted was formerly the United States Senator from Delaware where he served on the Foreign Relations, Armed Services, Judiciary, and Homeland Security Committees. In addition to work on these committees he was deeply involved in the Dodd Frank Wall Street reform, advocating for science technology engineering and math (STEM) education, and highlighting the value of federal employees. He is presently a Visiting Professor of the Practice at the Duke University Law School, and serves on the Board of Directors for the Institute for International Education, the National Democratic Institute, and the Ministry of Caring. He writes a weekly column in the News Journal. He is a Member of the Securities and Exchange Commission’s Equity Market Structure Advisory Committee. After he left the Senate he was the Chair of the Congressional Oversight Committee of the Troubled Asset Relief Program (TARP). He served 22 years on the staff of United Senator Joseph Biden, 19 years as Chief of Staff. Over the last 24 years he has taught at Duke University in the Law School, the Sanford School of Public Policy, and the Fuqua School of Business. From 1995 until 2008, he was a Board member of the Broadcasting Board of Governors (BBG), the independent, autonomous, federal entity responsible for all U.S. government and government- sponsored non-military international broadcasting. He was appointed to the BBG by the Presidents Clinton and Bush and was confirmed by the Senate for four terms. Senator Ted Kaufman official website

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Manoj Narang: Manoj Narang is the founder and CEO of MANA Partners LLC, a quantitative trading and financial technology firm. Previously, Manoj was founder and CEO of Tradeworx Inc, where he created and ran the firm's quantitative trading and technology businesses, spearheading the sale of the firm’s market access platform to Bank of America and the sale of the MIDAS system to the SEC. He also directed the firm’s participation in high-profile projects such as CAT (Consolidated Audit Trail), OPRA, and SIP. His accomplishments were recognized by Institutional Investor magazine, where he has been named one of the top 40 trading technology executives worldwide for three consecutive years. He was also named one of “Seven Major Players in High Frequency Trading” by CNBC. An internationally recognized expert in algorithmic trading, Manoj has provided expert testimony on market structure and regulation before the US Senate, and has met with and advised dozens of high-ranking officials of regulatory and policy-making agencies worldwide including the SEC, Congress, Treasury Department, and DARPA. Prior to founding Tradeworx, Mr. Narang worked in quantitative trading at Goldman Sachs, Citibank, and Credit Suisse. He received his BS in Math and Computer Science from MIT in 1991.

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Eric W Noll: Eric W. Noll is currently President and Chief Executive Officer of Convergex.  Prior to joining Convergex in 2013, Mr. Noll was Executive Vice President, Transaction Services at NASDAQ OMX, Inc., where he was responsible for all U.S and U.K. equity, options and futures exchanges – NASDAQ, NOM, PHLX, PSX, BX, BX Options, NFX and NLX.  In this role, Mr. Noll helped manage and grow all relationships with broker-dealers and investors (buy side) for equities, options and futures. In 2015, Eric was selected by the Securities and Exchange Commission (SEC) to be a member of its Equity Market Structure Advisory Committee, established to provide a formal mechanism for receiving advice and recommendations related to U.S. equity market structure issues. In addition, Eric was also selected to Chair the SEC Market Quality subcommittee.  Eric also serves on the board of directors of The Options Clearing Corporation (OCC), the world’s largest equity derivatives clearing organization.  Finally, Eric was also named to the Institutional Investor’s 2016 Trading Technology 40, which recognizes financial industry innovators and visionaries. 

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Bob Pisani: Bob Pisani is the Stocks Correspondent for CNBC. Our historian, Richard Sylla, reads a passage from a paper Bob Pisani wrote called ‘Plundered by Harpies: An Early History of High Speed Trading'. Link to the paper here.

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Joseph Saluzzi: Joseph Saluzzi is partner, co-founder and co-head of equity trading of Themis Trading LLC, a leading independent agency brokerage firm that trades equities for institutional money managers and hedge funds. He is also the co-author of Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street are Destroying Investor Confidence. Mr. Saluzzi is a frequent speaker at industry conferences on issues involving market access, algorithmic trading and other sell- and buy-side concerns.  Saluzzi has provided analysis to regulators, including the Securities and Exchange Commission and as a member of the Commodity Futures Trading Commission’s new Subcommittee on Automated and High Frequency Trading. He has provided expert commentary for media outlets such as CBS’s 60 Minutes, BBC Radio, Bloomberg Television & Radio, CNBC, Fox Business, BNN, The New York Times, The Wall Street Journal, USA Today, Reuters, Associated Press, Los Angeles Times and Bloomberg News.  Mr. Saluzzi also has authored articles for Traders Magazine, Dow Jones and Journal of Investment Compliance.

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Cameron Smith: Mr. Smith is President of Quantlab Financial, a Houston based quantitative technology and trading company that operates globally. Prior to joining Quantlab, Mr. Smith served as Executive Vice President and General Counsel of Instinet Incorporated, a global institutional agency broker. Mr. Smith’s other professional experiences include serving as Chief Strategy Officer for INET ATS, Inc. and General Counsel for the Island ECN where he was deeply involved in many of the key regulatory debates and technological changes that shaped the current equity market structure. In addition, Mr. Smith worked for 5 years at the United States Securities and Exchange Commission in the Division of Market Regulation and in Romania and Moldova on capital market development projects funded by USAID. Mr. Smith received his Juris Doctorate in 1991 from the Seattle University School of Law.

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Richard Sylla: Dr. Richard Sylla is the Henry Kaufman Professor of the History of Financial Institutions and Markets and a professor of economics, entrepreneurship and innovation at the New York University Stern School of Business. He is the author of several books, including The American Capital Market and A History of Interest Rates. His writing has appeared in numerous publications, including theJournal of Economic History, Explorations in Economic History, Small Business and American Life: A History and Business and Economic History. He has served on the editorial board of many journals that include Enterprise and Society, Economic and Financial History Abstracts, and the Museum’s quarterly magazine,Financial History. He served as President of the Economic History Association and the Business History Conference. He has been a member of the Museum’s Board of Trustees since 2004, and the Chairman of the Board since 2010. He is also a guest curator of several of the Museum’s exhibits.

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Voices at top of show, in order of appearance: Cameron Smith, Joe Saluzzi, Cameron Smith again, Senator Ted Kaufman, and Manoj Narang

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  1. Music by Hamilton Leithauser

  2. Additional music credit: Sneaky Snitch by Kevin MacLeod, incompetech.com:https://www.youtube.com/watch?v=tGadNGeMv_0

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