HFT Regulation Requires Attention to Motives and Consequences

<h3 class="dek">What motivates countries to discourage HFT?<a href="http://www.professorhollybell.com/wp-content/uploads/2014/05/ID-100173239.jpg"><img class="alignright size-medium wp-image-2696" src="http://www.professorhollybell.com/wp-content/uploads/2014/05/ID-100173239-300x211.jpg" alt="HFT" width="300" height="211" /></a></h3> <p class="dek">"While there are several empirically demonstrated benefits of high-frequency trading, including improved liquidity and reduced transaction costs, the current arguments against HFT are largely qualitative in nature. With that in mind, what are the drivers behind global HFT regulation, and do they suggest a market failure attributable to HFT?"</p> <p class="dek">My article, previewed above, is available at <a href="http://tabbforum.com/opinions/hft-regulation-requires-attention-to-motives-and-consequences" target="_blank">Tabb Forum</a></p> <h3 class="dek"><a href="http://www.professorhollybell.com">Return to homepage</a></h3>

Tagged Read More
HFT Regulation

An Analysis of Global HFT Regulation

<h2 class="p1"><a href="http://www.professorhollybell.com/wp-content/uploads/2014/05/ID-10068053.jpg"><img class="alignleft size-medium wp-image-2692" src="http://www.professorhollybell.com/wp-content/uploads/2014/05/ID-10068053-300x199.jpg" alt="HFT Regulation" width="300" height="199" /></a>Motivations, Market Failures, and Alternative Outcomes</h2> <p class="p1">"Recent market events like the “flash crash” of 2010, algorithmic failures at Knight Capital, and the <span style="font-size: 11.818181991577148px;">release of Michael Lewis’s book Flash Boys (2014)—with his claims that markets are “rigged”—have </span><span style="font-size: 11.818181991577148px;">heightened scrutiny of high-frequency trading (HFT) and increased demands for more aggressive </span><span style="font-size: 11.818181991577148px;">regulation. However, HFT has several empirically demonstrated benefits, and the current, largely </span><span style="font-size: 11.818181991577148px;">qualitative arguments against it call for careful scrutiny of proposed regulations.</span></p> <p class="p2"><span style="font-size: 11.818181991577148px;">In a new study for the Mercatus Center at George Mason University, Holly A. Bell and Harrison </span><span style="font-size: 11.818181991577148px;">Searles analyze the potential economic benefits of HFT and assess several proposed or adopted </span><span style="font-size: 11.818181991577148px;">regulatory schemes from around the world."</span></p> <p class="p2">The full study is available from the Mercatus Center by clicking <a title="An Analysis of Global HFT Regulation" href="http://mercatus.org/sites/default/files/Bell_GlobalHFTRegulation_v2.pdf" target="_blank">here</a></p> <p class="p2"><em>Holly A. Bell

Tagged , , Read More

Offshore Corporate Tax Havens Shift Burden to Individual Tax Payers

<h2>"...tax haven abusers force other Americans to shoulder their tax <a href="http://www.professorhollybell.com/wp-content/uploads/2013/11/ID-10095024.jpg"><img class="alignright size-medium wp-image-2627" alt="tax" src="http://www.professorhollybell.com/wp-content/uploads/2013/11/ID-10095024-300x249.jpg" width="300" height="249" /></a>burden."</h2> <p>U.S. PIRG, an organization I don't generally have much in common with, published an interesting and informative report on offshore corporate tax havens. While I don't necessarily agree with the causes of the problem the author suggests, I agree with the effects.</p> <p>From U.S. PIRG:</p> <p>"Many large U.S.-based multinational corporations avoid paying U.S. taxes by using accounting tricks to make profits made in America appear to be generated in offshore tax havens—countries with minimal or no taxes. By booking profits to subsidiaries registered in tax havens, multinational corporations are able to avoid an estimated $90 billion in federal income taxes each year. These subsidiaries are often shell companies with few, if any employees, and which engage in little to no real business activity.</p> <div dir="ltr" data-font-name="g_font_154_0" data-canvas-width="289.72533961296097">Loopholes in the tax code make it legal

Tagged , , Read More

You Can’t Keep Your Money Because It Belongs To The Government

<h2><a href="http://www.professorhollybell.com/wp-content/uploads/2012/12/ID-10052370.jpg"><img class="alignleft size-medium wp-image-2159" title="ID-10052370" src="http://www.professorhollybell.com/wp-content/uploads/2012/12/ID-10052370-300x198.jpg" alt="" width="300" height="198" /></a>If you think you earn your money, you are wrong.</h2> As I have been watching the debates over the debt ceiling, the fiscal cliff, and taxation I am reminded of one assumption about <b>money</b> the government makes (often unconsciously) that those of us who think we should be allowed to keep the <i>money</i> we have earned often forget: It’s not your <u>money</u>, it belongs to the government. The government prints it, backs it by their “full faith and credit”, and decides how much will be circulating in the economy at any given time. If all money belongs to the government, then you are not entitled to keep it.  The government gets to decide how much to give you. Those who wish to increase the marginal tax rate to 91% believe you are taking too much of the government’s money. In other words,

Tagged , , , , Read More

The Myth of Austerity

<em>Authored by Philipp Bagus via the <a rel="nofollow" href="http://mises.org/daily/6289/The-Myth-of-Austerity">Ludwig von Mises Institute</a>,<a href="http://www.professorhollybell.com/wp-content/uploads/2012/11/ID-10047143.jpg"><img class="alignright size-medium wp-image-2149" title="ID-10047143" src="http://www.professorhollybell.com/wp-content/uploads/2012/11/ID-10047143-225x300.jpg" alt="austerity"width="225" height="300" /></a></em> <strong>"Many politicians and <a rel="nofollow" href="http://www.ft.com/intl/cms/s/0/47045e96-df95-11df-bed9-00144feabdc0.html#axzz29qISF42h">commentators</a> such as <a rel="nofollow" href="http://www.nytimes.com/2012/06/01/opinion/krugman-the-austerity-agenda.html?_r=0">Paul Krugman</a> claim that Europe's problem is <b>austerity</b>, i.e., there is insufficient government spending.</strong> The common argument goes like this: <em>Due to a reduction of government spending, there is insufficient demand in the economy leading to unemployment. The unemployment makes things even worse as aggregate demand falls even more, causing a fall in government revenues and an increase in government deficits. European governments pressured by Germany (which did not learn from the <a rel="nofollow" href="http://www.spiegel.de/wirtschaft/soziales/euro-krise-wie-merkel-uns-in-den-ruin-treibt-a-839903.html">supposedly fateful policies</a> of Chancellor Heinrich Brüning) then reduce government spending even further, lowering demand by laying off public employees and cutting back on government transfers. This reduces demand even more in a never ending downward spiral of misery</em>. <strong>What can be done to break out

Tagged , , , , Read More

Why Krugman and Stiglitz Are Wrong About Government Spending

<a href="http://www.professorhollybell.com/wp-content/uploads/2012/11/ID-10053886.jpg"><img class="alignleft size-medium wp-image-2105" title="ID-10053886" src="http://www.professorhollybell.com/wp-content/uploads/2012/11/ID-10053886-240x300.jpg" alt="government spending"width="240" height="300" /></a> <h2><strong></strong>This is not the government spending of WWII</h2> By Holly A. Bell On October 23, 2012, the Institute for New Economic Thinking (INET) hosted an economics discussion with Paul Krugman and Joseph Stiglitz. The moderator of the discussion asked the Nobel Memorial Prize in Economic Sciences winning economists what the solution to our current recession is. Paul Krugman quickly spoke up and said that much more <i>government spending</i> was needed to pull us out of the recession. Both Krugman and Stiglitz began to justify this position using the example of how <u>government spending</u> that supported World War II pulled us out of the Great Depression. Specifically they laid out the history as follows: 1)   Two factors that lead to the Great Depression included a significant household debt bubble and a structural economic shift from a rural agricultural economy to an urban industrial economy. 2)  

Tagged , , , , , Read More

The Quest for Certainty

[repostus hash=2b346fd31b93007a0e56b9f5ca87ae96 title=The+Quest+for+Certainty host=Market+Shadows short=1rjnE snip=The+Quest+for+Certainty+%E2%80%9CAs+far+as+the+laws+of+mathematics+refer+to+reality%2C+they+are+not+certain%3B+and+as+far+as+they+are+certain%2C+they+do+not+refer+to+reality.%E2%80%9D+%E2%80%93+Albert+Einstein+%E2%80%9CTo+trace+something+unknown+back+to+something+known+is+alleviating%2C+soothing%2C+gratifying+and+gives+moreover+a+feeling%26hellip%3B thumb=3138651 jump=5] <h3><a href="http://www.professorhollybell.com">Return to Home Page</a></h3> <h3>Certainty image courtesy of hin255</h3>

Tagged , , Read More

Will Quantitative Easing Cause Asset Bubbles in the Developing World?

<div class="rpuEmbedCode"><!--rpuEmbedStart--> <script type="text/javascript" src="http://1.rp-api.com/rjs/repost-article.js?3" data-cfasync="false"></script> <div class="rpuArticle rpuRepost-6c68420ee412e188311174e9f0cbf602-top rpuNoTitle" style="margin: 0; padding: 0;"><a class="rpuThumb" href="http://s.tt/1q0mH" rel="norewrite"><img style="float: left; margin-right: 10px;" src="http://img.1.rp-api.com/thumb/3060894" alt="" /></a> <a class="rpuTitle" href="http://s.tt/1q0mH" rel="norewrite"><strong>Easing may cause developing world asset bubbles: IMF</strong></a> (via <a class="rpuHost" href="http://s.tt/1q0mH" rel="norewrite">AFP</a>) <p class="rpuSnip">Monetary easing in the developed world could cause overheating and asset <i>bubbles</i> in emerging economies, the International Monetary Fund's managing director said in Tokyo on Sunday. "Accommodative monetary policies... could strain the capacity of those economies to absorb the potentially large flows…</p> </div> <div class="rpuKeywords" style="display: none;">capital flows, monetary policies, rich countries, developing world, Accommodative monetary policies, huge capital flows, International Monetary Fund, volatile capital flows, asset price <u>bubbles</u>, Minister Guido Mantega, advanced-economy monetary policies, Monetary easing, international capital flows, chief ben bernanke, key developing world, emerging economies, large flows, asset bubbles, emerging-market economies, developed world, Christine Lagarde, emerging nations, currency fluctuations, Emerging markets, managing director, huge waves, World Bank, Currency wars, national currencies, economic

Tagged , , , , Read More

Suffering From Financial Repression

<h2>Feeling repressed? Take two aspirin and call your central banker in the morning.</h2> <a href="http://www.professorhollybell.com/wp-content/uploads/2012/10/ID-10079004.jpg"><img class="alignright size-medium wp-image-2047" title="ID-10079004" src="http://www.professorhollybell.com/wp-content/uploads/2012/10/ID-10079004-300x225.jpg" alt="" width="300" height="225" /></a> By <a href="http://ezinearticles.com/?expert=Larry_M._Elkin">Larry M. Elkin</a> Those of us who like to save and invest money, or who start businesses - I'm guilty on both counts - tend to be glass-half-full optimists. We do not overlook today's challenges, but we assume that hard work and thoughtful planning can make for a better future. Lately, however, a lot of us are seeing the glass half empty. Our carefully nurtured Wall Street "animal spirits" have departed for greener pastures. Trying to borrow money from a bank for personal or business reasons will put you through underwriting hell. You may not get the loan anyway. It can seem as though the bank has only a few carefully guarded dollar bills hidden in a vault somewhere, whose release requires the approval of a cabinet-level official. Yet if

Tagged , , , , , , , , Read More

Central Bank Power And Its Limit

Central bankers have the power to provide limitless cheap credit to governments. But that doesn't fix the economy. <b>Central Bank</b> Power And Its Limit By <a href="http://ezinearticles.com/?expert=Larry_M._Elkin">Larry M. Elkin</a> The euro will not dissolve, and the U.S. Treasury can borrow as much money as it wants while paying practically no interest, all because a couple of central bankers say so. That's real power. But companies are not hiring, consumers are not spending, governments are sinking deeper into debt, and American workers are abandoning fruitless job searches in droves, despite years of effort by those same central bankers to make things better. That's where <i>central bank</i> power meets its limit. The European <u>Central Bank</u> and its U.S. counterpart, the Federal Reserve, can create money and put it into circulation by lending it out. This, combined with their ability to set target levels of interest rates - in effect controlling the price of money they create -

Tagged , , , , , Read More