World’s Biggest Wealth Fund Escapes Flash Boys in IEX Dark Pool
2014-06-03 22:00:01.6 GMT
By Saleha Mohsin
June 4 (Bloomberg) -- Norway’s $880 billion sovereign
wealth fund, the world’s largest, is throwing its support behind
Brad Katsuyama’s new exchange.
Katsuyama’s IEX Group Inc., made famous in Michael Lewis’s
best-selling book “Flash Boys,” could shield investors from
the predatory habits of high-frequency traders, said the fund,
which holds $521.2 billion in stocks globally and is Europe’s
biggest equity investor.
“IEX is a trading venue where all players participate on
the same terms,” oil fund spokesman Thomas Sevang said in an e-
mailed response to questions. “We support this.”
IEX, which the oil fund uses for both direct and indirect
trades, doesn’t pay firms to buy or sell shares, shunning a
practice that many markets use to lure business from high-speed
traders. It mandates a 350-microsecond delay between requests to
trade and executions to prevent traders from pre-empting their
moves through high-frequency maneuvers.
Concern about dark pools was amplified after the
publication of “Flash Boys,” which portrayed an equities
market where exchanges, broker-dealers and high-frequency
traders are conspiring to cheat investors.
The book says the firms involved helped rig the $22
trillion U.S. stock market. The story centers around Katsuyama,
who was global head of electronic sales and trading at RBC
Capital Markets LLC before becoming president and chief
executive officer of IEX, and his efforts to shed light on the
alleged practice of front-running investors by gathering data on
their trades before they’re executed and then acting on that
information.
Dark Pool
Volume on IEX has steadily grown since its creation, with
an average of 31.3 million shares changing hands on the platform
each day last month, compared with 29 million in April.
Katsuyama’s trading platform “might solve some of these
problems, but not all of them,” Sevang said. “One problem
related to IEX is that the pricing must take place at another
market place, due to the fact that IEX is a dark pool.”
Katsuyama and Lewis were attacked by William O’Brien, the
president of exchange operator Bats Global Markets Inc., in an
April 1 interview on CNBC, for what he described as a
misunderstanding of how markets operate. He accused Katsuyama of
criticizing high-frequency trading to promote his own exchange.
“It’s a very, very old tactic to try to build a business
on the planks of fear, mistrust and accusation,” O’Brien said
in April. “This has certainly taken that to new level.”
Bats Corrects
Bats three days later corrected a comment by O’Brien from
the same program, after he misstated details about the speed of
data feeds used at two of his exchanges.
Norway’s wealth fund, which gets its guidelines from the
government in Oslo, saw its stock holdings return 26.3 percent
in 2013, while the total portfolio rose 15.9 percent. The fund
is mandated to hold 60 percent in stocks, 35 percent in bonds
and 5 percent in real estate.
In March, New York Attorney General Eric Schneiderman said
he was looking into practices that give some firms a speed
advantage in equities trading. Agents from the Federal Bureau of
Investigation are investigating whether HFT firms break U.S.
laws by acting on nonpublic information to gain an edge.
High-frequency traders rely on computers to post and cancel
orders at rates measured in thousandths and even millionths of a
second to capture price discrepancies on more than 50 public and
private venues that make up the American equities market.
For Related News and Information:
High-Frequency Traders Ripping Off Investors, Michael Lewis Says
NSN N39UHZ6JTSFO <GO>
IEX Details Dark Pool Process to Ease High-Frequency Concerns
NSN N4UX526TTDS1 <GO>
Top Nordic Stories: TOP NORD <GO>
Stories on Norway’s Oil Fund 100781Z NO <Equity> CN <GO>
Stories on sovereign wealth funds NI SWF <GO>
To contact the reporter on this story:
Saleha Mohsin in Oslo at +47-22-00-8214 or
smohsin2@bloomberg.net
To contact the editors responsible for this story:
Jonas Bergman at +47-22-00-8213 or
jbergman@bloomberg.net
Tasneem Hanfi Brogger, Kim McLaughlin
2014-06-03 22:00:01.6 GMT
By Saleha Mohsin
June 4 (Bloomberg) -- Norway’s $880 billion sovereign
wealth fund, the world’s largest, is throwing its support behind
Brad Katsuyama’s new exchange.
Katsuyama’s IEX Group Inc., made famous in Michael Lewis’s
best-selling book “Flash Boys,” could shield investors from
the predatory habits of high-frequency traders, said the fund,
which holds $521.2 billion in stocks globally and is Europe’s
biggest equity investor.
“IEX is a trading venue where all players participate on
the same terms,” oil fund spokesman Thomas Sevang said in an e-
mailed response to questions. “We support this.”
IEX, which the oil fund uses for both direct and indirect
trades, doesn’t pay firms to buy or sell shares, shunning a
practice that many markets use to lure business from high-speed
traders. It mandates a 350-microsecond delay between requests to
trade and executions to prevent traders from pre-empting their
moves through high-frequency maneuvers.
Concern about dark pools was amplified after the
publication of “Flash Boys,” which portrayed an equities
market where exchanges, broker-dealers and high-frequency
traders are conspiring to cheat investors.
The book says the firms involved helped rig the $22
trillion U.S. stock market. The story centers around Katsuyama,
who was global head of electronic sales and trading at RBC
Capital Markets LLC before becoming president and chief
executive officer of IEX, and his efforts to shed light on the
alleged practice of front-running investors by gathering data on
their trades before they’re executed and then acting on that
information.
Dark Pool
Volume on IEX has steadily grown since its creation, with
an average of 31.3 million shares changing hands on the platform
each day last month, compared with 29 million in April.
Katsuyama’s trading platform “might solve some of these
problems, but not all of them,” Sevang said. “One problem
related to IEX is that the pricing must take place at another
market place, due to the fact that IEX is a dark pool.”
Katsuyama and Lewis were attacked by William O’Brien, the
president of exchange operator Bats Global Markets Inc., in an
April 1 interview on CNBC, for what he described as a
misunderstanding of how markets operate. He accused Katsuyama of
criticizing high-frequency trading to promote his own exchange.
“It’s a very, very old tactic to try to build a business
on the planks of fear, mistrust and accusation,” O’Brien said
in April. “This has certainly taken that to new level.”
Bats Corrects
Bats three days later corrected a comment by O’Brien from
the same program, after he misstated details about the speed of
data feeds used at two of his exchanges.
Norway’s wealth fund, which gets its guidelines from the
government in Oslo, saw its stock holdings return 26.3 percent
in 2013, while the total portfolio rose 15.9 percent. The fund
is mandated to hold 60 percent in stocks, 35 percent in bonds
and 5 percent in real estate.
In March, New York Attorney General Eric Schneiderman said
he was looking into practices that give some firms a speed
advantage in equities trading. Agents from the Federal Bureau of
Investigation are investigating whether HFT firms break U.S.
laws by acting on nonpublic information to gain an edge.
High-frequency traders rely on computers to post and cancel
orders at rates measured in thousandths and even millionths of a
second to capture price discrepancies on more than 50 public and
private venues that make up the American equities market.
For Related News and Information:
High-Frequency Traders Ripping Off Investors, Michael Lewis Says
NSN N39UHZ6JTSFO <GO>
IEX Details Dark Pool Process to Ease High-Frequency Concerns
NSN N4UX526TTDS1 <GO>
Top Nordic Stories: TOP NORD <GO>
Stories on Norway’s Oil Fund 100781Z NO <Equity> CN <GO>
Stories on sovereign wealth funds NI SWF <GO>
To contact the reporter on this story:
Saleha Mohsin in Oslo at +47-22-00-8214 or
smohsin2@bloomberg.net
To contact the editors responsible for this story:
Jonas Bergman at +47-22-00-8213 or
jbergman@bloomberg.net
Tasneem Hanfi Brogger, Kim McLaughlin