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Just 3 Senators Have Questions At Hearing On Flash Trading

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WASHINGTON -- The book “Flash Boys” sounded the alarm about a potentially rigged stock market system, prompting the Senate Homeland Security and Governmental Affairs' investigative subcommittee to hold a hearing on high-frequency trading. But only three of the committee's 14 members showed up to ask questions.

Sens. John McCain (R-Ariz.), Carl Levin (D-Mich.), and Ron Johnson (R-Wis.) attended the hearing, which probed investor confidence in the stock market and potential conflicts of interest stemming from flash trading. Finance experts Robert Battalio and Bradley Katsuyama testified during the hearing's first panel.

While McCain and Levin expressed concern over flash trading, Johnson didn’t understand what the outcry was about.

“This hearing should be about restoring confidence,” Johnson said. “I don’t think it’s restoring confidence if we try and create a state of fear and set up straw men, in terms of the boogey men out there, trying to game the system. The best way to ensure confidence, the best way to ensure best price is through maximum competition and transparency in the marketplace.”

Battalio and Katsuyama agreed that more transparency is needed but Battalio, a professor at Notre Dame, repeatedly argued with Sen. Johnson about the importance of trading prices, which can vary depending on whether or not you have access to high frequency trading.

Another issue discussed during the hearing was "maker-taker payments," excessive fees firms can soak up through high-frequency trading. Johnson suggested the $200 million in profits made by a major financial firm, like TD Ameritrade, is an insignificant percentage of all the money flowing through the markets.

“What’s $200 million in relation to $27 trillion?" Johnson asked.

This week, a separate Senate hearing will be held by the Subcommittee on Securities, Insurance, and Investment, to examine flash trading's impact on the economy.

**Watch Sen. Johnson’s comments above**

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