Who Benefits From Market Speed Bumps? The Exchanges

<p class="story-body-text story-content" data-para-count="159" data-total-count="159">Since the election, stock prices have risen sharply on hopes that a wave of pro-growth policies under Donald J. Trump will drive up equity prices even further.</p> <p class="story-body-text story-content" data-para-count="166" data-total-count="325">But Mr. Trump’s administration will soon face a trend that threatens to move the long-term benefits found in stock markets away from investors and toward exchanges.</p> <p class="story-body-text story-content" data-para-count="166" data-total-count="325">Continue reading in The <a href="http://www.nytimes.com/2016/12/23/business/dealbook/who-benefits-from-market-speed-bumps-the-exchanges.html?_r=0">New York Times</a></p> <p class="story-body-text story-content" data-para-count="166" data-total-count="325"><em>Holly A. Bell is an associate professor at the University of Alaska in Anchorage and a consulting scholar on financial market structure and regulation. She is also the author of the thriller <a href="https://www.amazon.com/Trading-Salvos-Kate-Adams-Novel-ebook/dp/B01H0OOUE0">“Trading Salvos.”</a></em></p>

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Stock Market

My latest on CNBC: Why the SEC should just say ‘no’ to IEX

<section class="cols2"> <div class="unit col1"><article> <div class="story"> <div id="article_body" class="content"> <div class="group-container "> <div class="group"> <div class="story-top"> <div class="story-header-left twoCol"> <div class="source">By UCLA Professor Avanidhar Subrahmanyam and University of Alaska Professor Holly Bell</div> </div> </div>   Since IEX submitted an application last year to the <a href="http://www.cnbc.com/sec/" target="_blank">SEC</a> to become a public stock exchange, a big debate has erupted about a seemingly small time frame — 350 microseconds. IEX's proposed exchange would implement an intentional delay of 350 microseconds to incoming and outgoing information, except for a few select order types. </div> </div> <div class="group-container "> <div class="group"> The debate has led the SEC to issue an interpretive release, which in short asks: Do delays under 1,000 microseconds pose a problem for equity market structure? In the short term, the answer will affect IEX's application to become a recognized national exchange. Long term, the answer could redefine the foundation of equity market structure. Here's our answer: Deliberately adding any amount of latency to the current market system would be

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Database

The Potential Effects of Reg AT: Unintended Risks and Diminished Cooperation with Market Participants

Ill-considered regulation regarding algorithmic trading will adversely affect the ability of legitimate market participants to contribute to liquidity, price discovery, narrow spreads, and low trading costs. The CFTC shares with market participants a growing interest in algorithmic trading and its potential effects on the markets. Rather than working with market participants cooperatively, the Commission proposes a prescriptive regime applicable to virtually any firm that trades in the futures (and swaps) markets. If finalized, this proposal will establish an approach dominated by enforcement that will chill firms’ willingness to work with the Commission to address emerging problems in the area. In addition, by opening firms’ source code to unlimited inspection by the Commission and others, the proposal creates dangerous vulnerabilities for an asset of utmost importance to trading firms. <strong>To see full article click <a href="http://mercatus.org/publication/potential-effects-reg-unintended-risks-and-diminished-cooperation-market-participants">here</a></strong>

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Macroeconomics

One Reason Our National Economic Policy Stinks

<a href="http://www.professorhollybell.com/wp-content/uploads/2015/09/ID-100332225.jpg"><img class="wp-image-2757 alignleft" src="http://www.professorhollybell.com/wp-content/uploads/2015/09/ID-100332225-300x300.jpg" alt="Macroeconomics" width="276" height="276" /></a>Every year I attend a major economics conference to geek out with and learn from a significant collection of global economists. While just breathing the air at such an event can be inspiring, talking to people often leads to sheer terror about the future of our national and global economy. Last year’s event was no exception. At one of the many receptions I attended, I was nibbling hors d'oeuvres & sipping a glass of wine surrounded at the table by young professionals. About half worked for government agencies and the other half were PhD Students. One of the PhD students, we’ll call him Frank, was getting ready to graduate from a prestigious university in a few months with a degree in Macroeconomics and Econometrics and move to a job at the Federal Reserve. Frank fancied himself an expert on inflation targets and monetary

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HFT

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>

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pollution

Do U.S. EPA Regulations Actually Make Global Pollution Worse?

<h2>Exporting pollution, one factory at a time.<a href="http://www.professorhollybell.com/wp-content/uploads/2014/03/ID-10043521.jpg"><img class="alignright size-medium wp-image-2680" alt="pollution" src="http://www.professorhollybell.com/wp-content/uploads/2014/03/ID-10043521-200x300.jpg" width="200" height="300" /></a></h2> <p>The Heritage Foundation recently published an article on how climate regulations designed to put an end to coal fired electric plants will significantly harm U.S. manufacturing (<a href="http://www.heritage.org/research/reports/2014/03/epas-climate-regulations-will-harm-american-manufacturing">EPA's Climate Regulations Will Harm American Manufacturing</a>). This got me thinking, if EPA regulations drive manufacturing offshore, is it possible that by increasing environmental regulation in the U.S. and driving manufacturing to regions where little environmental regulation exists, is the EPA making global pollution worse overall?</p> <p>Another way to think about this is: Is there a regulatory "sweet spot" that is more likely to keep manufacturing in the U.S. while reducing overall global pollution? After all, pollution in China, for example, ultimately impacts the U.S.  (see <a href="http://www.nytimes.com/2014/01/21/world/asia/china-also-exports-pollution-to-western-us-study-finds.html?_r=0">here</a>).</p> <p>The short answer to the question is "maybe". In theory this would appear to be true, however, finding publicly available year-over-year raw

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marijuana

7 Outcomes of Legalized Marijuana in Alaska (or not)

<h2><a href="http://www.professorhollybell.com/wp-content/uploads/2014/03/ID-10020100.jpg"><img class="alignleft size-medium wp-image-2670" alt="marijuana" src="http://www.professorhollybell.com/wp-content/uploads/2014/03/ID-10020100-200x300.jpg" width="200" height="300" /></a>Marijuana in Alaska?</h2> <p>As the ballot measure allowing citizens to vote on the legalization of recreational marijuana in the State of Alaska moves forward, I started to think about some possible changes we might see in our state if the measure passes. The following are the top 7 changes our state might see if recreational use of marijuana becomes legal:</p> <p>1)    Tok will become the #1 tourist destination in the state and Fast Eddy’s will change its name to Whoa Dude.</p> <p>2)    A new State law will require all vending machines to carry Funyuns and Peggy’s pies.</p> <p>3)    Sharing a single joint with several people while enjoying Alaska’s scenery will be known as a “Hatcher’s Pass”.</p> <p>4)    The average length of Air Force One refueling stops in Alaska will increase by 17%.</p> <p>5)    Whether or not university students should be allowed to carry firearms on campus will

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Obamacare

From Reason.com – Obamacare’s Authoritarian Problem

<h2><a href="http://www.professorhollybell.com/wp-content/uploads/2013/11/ID-10071137.jpg"><img class="alignleft size-medium wp-image-2638" alt="Obamacare" src="http://www.professorhollybell.com/wp-content/uploads/2013/11/ID-10071137-300x226.jpg" width="300" height="226" /></a>Consumer choice trumps coercion every time.</h2> <p>David Harsanvi at Reason.com argues why your judgement about which healthcare option is best for you is better than the collective judgement of 51.1% of the electorate.</p> <p>"Let me put it this way: There's this Chinese restaurant near my house. It's not the cleanest place, granted. And the folks who "work" there are, it seems, completely uninterested in my dining experience. The food is priced accordingly. But I love the dumplings. It's really all that matters to me. There's another Chinese place nearby. This one is newer. It has a friendly and attractive staff. It offers me clean silverware, and I walk on expensive contemporary tiles. All that classy stuff is nice, and it's also embedded into the price of my dumplings -- which are no better. I don't want to pay for the tiles. I just

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Obamacare

A Busload of Silicon Valley Programmers: The Senator John McCain Solution to Obamacare

<h2><a href="http://www.professorhollybell.com/wp-content/uploads/2013/10/ID-10089802.jpg"><img class="alignleft size-medium wp-image-2618" alt="Obamacare" src="http://www.professorhollybell.com/wp-content/uploads/2013/10/ID-10089802-198x300.jpg" width="198" height="300" /></a>Is the private sector the solution to a public sector problem?</h2> <p>I haven’t been blogging much lately. This is primarily due to the overall heightened state of daily outrage I’ve been walking around in for about the last year and a half. A friend told me this morning that this is a privilege reserved for those of at least 70, but I’m an old soul who has been telling cars to slow down since I was in my 20’s. I can’t live by your outrage privilege rules, man.</p> <p>I try to touch on issues and perspectives others aren’t addressing and I’ve found those subjects difficult to find lately, but Senator John McCain helped me out this morning. I was watching Fox News while eating my scrambled egg whites (another sign I might be 70) when the Senator suggested—and I paraphrase—that the solution to

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Obamacare

What Might “Obamacare” and the Healthcare Industry Look Like in 2038?

<h2><a href="http://www.professorhollybell.com/wp-content/uploads/2013/09/ID-100175875.jpg"><img class="alignleft size-medium wp-image-2606" alt="Obamacare" src="http://www.professorhollybell.com/wp-content/uploads/2013/09/ID-100175875-240x300.jpg" width="240" height="300" /></a>"Regardless of government healthcare mandates or other regulatory policies, market forces are always at work...Obamacare is a bad idea that may only get worse."</h2> By Holly A. Bell Regardless of government healthcare mandates or other regulatory policies, market forces are always at work and will mold the healthcare market to adjust to the new regulatory environment. If governments are unable to regulate away market forces, what impacts might the full implementation of the Affordable Care Act have on the healthcare market twenty years after full implementation? Using a basic economic principle, we can make some predictions about costs and demand and infer how the healthcare market and regulators might respond. <h3>Third party payer systems</h3> The primary goal of the Affordable Care Act is to ensure all American’s have affordable healthcare by creating a system of available and affordable health insurance. By doing so the government

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