New Book Blames SEC for Market Structure Woes
Traders Magazine Online News, January 14, 2013
If the Securities and Exchange Commission were to be eliminated, would the markets suffer?
Shutting down the agency actually would be good for America, according to Steve Wunsch, an industry consultant and former president of the ill-fated Arizona Stock Exchange. In a new book blaming society's ills on the government's obsession with fairness and equality, he argues that all problems associated with the modern stock market are due to SEC rules.
In his e-book, "Nature's God" (Amazon Digital Services, December 2012), Wunsch contends the SEC has implemented rules that benefit the retail investor to the detriment of the large money manager. That coupled with the SEC's "arrogance" and its "certainty that it's always right" has led the regulator to promulgate several rules that have wrecked the business, the book claims.
The most pernicious rule is Regulation NMS, approved in 2005, which forced the New York Stock Exchange to accept automated executions of trades. That led to today's all-electronic marketplace, complete with high frequency trading, overly complex order types, flash crashes, and botched initial public offerings, according to Wunsch.
"The SEC destroyed the greatest market in the world for capital raising and investing and replaced it with a casino of rapid fire trading," Wunsch wrote. The old models of the New York Stock Exchange auction and the Nasdaq dealer market were best, but vanished due to SEC meddling, according to Wunsch.
"Most troubling of all is that the incomprehensible operating mechanics of today's market leave investors, both big and small, feeling disadvantaged and gamed," Wunsch wrote.
The recently uncovered malfunctions in BATS Global Markets' visible and hidden order types were inevitable and "won't be the last," Wunsch tells Traders Magazine. "These problems have been getting worse for a long time, in fact since the SEC began to foist its National Market System on us. "
Wunsch has worked on Wall Street for over 30 years and is best known as the creator of the Arizona Stock Exchange, a call auction that never gained much traction. Wunsch's last industry position in 2008 was head of corporate initiatives at the ISE Stock Exchange, operated by the International Securities Exchange, primarily an options market operator.
In "Nature's God," Wunsch does not restrict his criticism to the SEC and the stock market. The book is a libertarian treatise on what he considers to be the wrong-headed nature of government involvement in all aspects of life, including commerce, religion and society. "The socialist regimes in the West stand in the way of prosperity and wealth for their citizens," the author believes.
Wunsch's book makes the point that there is nothing wrong with inequality-in fact, it is the natural state of things. It is government's desire to "level the playing field" that causes problems.
For more information on related topics, visit the following channels: