Most anniversaries are cause for celebration; today’s is cause for rumination.
On May 6, 2010, financial markets took a nose dive, plummeting around 1000 points in mere minutes. Called the “Flash Crash” for the speed by which stocks and other trades lost value, it stands as a rallying cry for doing things differently and implementing a long-term solution to market volatility.
Though no one has been able to pin down exactly what trade set off the sharp decline in the value of stocks, bonds, and the like that day, the pace of the loss set records the depths of which luckily have not been seen again. (Yet!)
In the four years that have passed since the Flash Crash, not much has changed to protect us from the super-fast trading that fueled the markets’ fire that day. Called high-frequency trading, complex computer programs automatically sniff around the market sensing tiny changes in prices and then attack; buying and selling at the speed of light. Though these high-frequency operations gain just a fraction of a cent in profit off of each trade, it really stacks up when the number of transactions is in the billions.
High-frequency trading has received lot of much-deserved attention recently due to Michael Lewis’ best-selling book: “Flash Boys: A Wall Street Revolt.” Accusing the markets of being “rigged,” Lewis argues in Flash Boys that exchanges have allowed high-frequency traders preferential access to trading platforms, giving them an unfair advantage over average investors. As the government investigates Lewis’ and others’ allegations, Congress, not wanting to be left out of the fun, has announced its own probe of the practice.
In all of this, there is a reason for merriment. Shining a spotlight on high-stakes, high-speed trading is sure to roll out the red carpet for lawmakers wanting a legislative long-term solution to the problem: a Wall Street tax, also called a financial transaction tax. Multiple proposals have been on the table for years, such as U.S. Sen. Tom Harkin’s (D-Iowa) and U.S. Rep. Peter DeFazio’s (D-Ore.) Wall Street Trading and Speculators Tax Act.
But the pressure is now building, and the public outcry will hopefully have lawmakers clamoring to join the call for a Wall Street Tax.
Now that would be a reason to celebrate.
Susan Harley is the deputy director for Public Citizen’s Congress Watch division.