David Swensen, the legendary chief investment officer at Yale University, says “America’s equity markets are broken,” rigged in favor of short-term players and against individual investors.
In an op-ed in Thursday’s New York Times, Swensen and co-author Yale Law Professor Jonathan Macey, argue that “individual investors, trading through brokers like Charles Schwab, e-Trade and TD Ameritrade, suffer first as the brokers profit from selling their retail orders to high frequency traders and again as those traders take advantage of the orders they bought.”
The authors urge the SEC to approve an application by IEX to become a national securities exchange.
IEX is headed by Brad Katsuyama, the hero of Michael Lewis’s book “Flash Boys: A Wall Street Revolt,” which focuses on the dangers of high frequency trading and Katsuyama’s possible solution: an online securities exchange that will slow trading by all participants – including high-frequency traders — by 350 microseconds.
High frequency traders would no longer be able to snap up shares before other orders are fulfilled, which creates disadvantages for other investors, forcing them to pay higher prices on purchases and accept lower prices on sales.