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Conquering Fear in Trading

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October 14, 2009

Word for Word

By Editorial Staff

Brett Mock is the incoming chairman of the Security Traders Association. Mock, a 15-year veteran and senior sales trader with BTIG in San Francisco, is the former head of the San Francisco STA chapter. He discusses trading issues and some of the work STA is involved in.


On the recently defeated transaction tax--

The transaction tax would have been a direct tax on everyone in the investment industry, not just traders, but also the individual investor. I think the tax came out of the high-frequency trading controversy. It was backed by the AFL-CIO. Some people were looking for ways to fund some new regulatory proposals. But a debate needs to happen on the proper regulation and taxation. We shouldn't have a knee-jerk policy response to these ideas. We're not anti-regulation, by any means--we just want smart regulation.



On his role as STA chairman--

Since the market meltdown last year, there have been all these ideas out there on how to reorganize a patchwork regulatory system. The beauty of STA is we relate to the quality of various equity markets. And if you look at what happened last year, the U.S. equity markets were the last bastions of liquidity. Generally, you have great liquidity. You have centralized clearing at the Depository Trust and Clearing Corp., so counterparty risk is limited. You also have price transparency and depth. You can see prices in real time. The overall quality of the equity markets has been shown. Yet much of the regulatory initiatives have been aimed at the equity markets, but a lot of the problems actually have come from the credit and derivative markets. We shouldn't harm the liquidity in the U.S. equity markets.



On predictions for the institutional trading business in the next year--

Our big concern is that we could lose a generation of investors because they fear the market is against them--whether it is because of Madoff or a misunderstanding of high-frequency trading or the short-sale rule. I think the media often does a disservice by not explaining some of the functions that are critical. Short selling is a legitimate practice. Short selling is a way of preventing bubbles and adds to liquidity. Look at last year, on Sept. 18, when the SEC issued its emergency order that prevented the short selling of financial stocks for three weeks. On Sept. 19, millions of shares were taken off the tape and thousands of trades busted, creating widespread uncertainty caused by knee-jerk regulatory actions.

Brett Mock, BTIG



On the role of regulation in general--

Wise regulation makes markets more competitive and transparent. It empowers consumers with effective disclosure to make rational decisions, effectively polices markets for force and fraud and reduces systemic risk. Counterproductive regulation hampers competitive markets, creates moral hazard, stifles innovation and diminishes the role of personal responsibility in our economy.



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