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Tim Quast
Traders Magazine Online News

We're All HFTs Now

In this guest commentary, author Tim Quast looks back at the history of HFT and how the market has evolved to where many firms now fit the definition of high-frequency trader.

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June 1, 2010

Kaufman's Crusade

Senate newcomer embarks on unexpected cause to reform equities

By James Ramage

Days after sitting down in his office with Traders Magazine, Sen. Ted Kaufman, D-Del., etched his thumbprint on the largest financial reform bill since the Great Depression. Call it "the Kaufman amendment."

Sen. Ted Kaufman, D-Del.

The May 5 amendment was short in content and simple in language. But as brief as it was, no one should underestimate its potential far-reaching effects on an industry that trades for the retirement accounts of tens of millions of Americans held in pension and mutual funds.

Securities pros believe the amendment would restrict off-board trading, and consequently end broker internalization and all dark liquidity--or liquidity not displayed on an exchange. Such an alteration would create yet another dramatic overhaul of the equities trading world, which has seen its share of change over the last 13 years--beginning with the Order Handling Rules, then Reg ATS, to penny trading, to the rise of electronic trading and, lastly, Reg NMS. (See the story on the amendment in this month's Rules & Regs.)

The amendment is not Kaufman's first foray into the equities markets since taking office in January 2009. He followed former Sen. Joseph Biden, who ascended to the vice presidency, and filled his seat. So far, Kaufman has set his sights on controversial practices--including short sale, flash orders, colocation and high-frequency trading. And the industry is listening.

 

 

The MBA Engineer

But why did Ted Kaufman, the 71-year-old newcomer, get so involved in the equities markets? And why now?

After all, he's not on any of the Senate committees that oversee banking or finance. And while he served as Biden's chief of staff, he wasn't really exposed to much legislation in banking or other areas of finance. Biden's biggest causes focused on the judiciary and foreign relations.

Kaufman lives in Wilmington, Del. He's been married to the same woman, Lynne, since 1960. He has three daughters and seven grandchildren. He greets people with a ready smile and a level stare. And he is fond of peppering his positions with metaphors.

Furthermore, Kaufman's a trained engineer with an MBA who has spent most of his career in and around government and academia. He served on Biden's staff for more than two decades. Yet so far he's chosen to devote a significant amount of energy to equities market structure for at least half of the two years he will serve in office. And the mantra that has guided his legislative decision-making has been "more transparency."

"Without transparency, there is little hope for effective regulation of our financial markets," Kaufman said.