WASHINGTON Feb 20 Dallas Mavericks owner and
prominent investor Mark Cuban is never shy about criticizing the
U.S. Securities and Exchange Commission and its failure to
prevail in its high-profile insider-trading case against him
As it turns out, he is equally passionate about
high-frequency trading, too.
At a lively private event in Washington on Thursday held by
Cooley LLP, one of the law firms that helped defend his case,
Cuban told a small group of lawyers that the SEC should stop
wasting its time focusing on insider-trading cases and turn its
attention to rapid-firing computer trading instead.
"It is the biggest threat to our national security, in my
opinion," Cuban said. "If I wanted to blow up this country, I
don't need bombs."
To watch a clip of his comments, visit
High-frequency trading is a topic that has been in
regulators' sights now for years, but experts have remained
divided on whether the practice helps or harms markets.
The SEC ramped up its review of high-speed computer trading
after the May 6, 2010 "flash crash," in which the Dow Jones
Industrial Average plunged about 700 points before sharply
Regulators later determined that high-speed traders did not
cause the crash. But market liquidity did dry up after
high-frequency traders hit the exits, prompting calls by some
for new rules that would require them to act as market-makers.
Cuban chided Washington policymakers for taking so long to
take action on the issue, noting they are merely "holding
hearings" and "discussing it."
He painted a hypothetical doomsday scenario, saying that a
"sovereign entity" could simply use algorithms to start trading
billions, and later down the road decide to intentionally "screw
up" the marketplace.
"It is going to happen so fast and it is going to be so
undetectable that people will say it's a fat finger," he said.
"The next thing you know, there are flash crashes...and there is
so much confusion that people don't trust the markets and then
they pull out."
He added that he believes high-speed trading "brings nothing
to the market" because it is "not an investment" and "doesn't
bring liquidity" because it is removed whenever there is a
threat to the algorithms.
Cuban's comments immediately generated a debate on Twitter,
with advocates saying that high-speed trading has actually made
the markets a better place.
High-frequency trading "has helped lower trading costs" and
"democratized the marketplace," tweeted the Modern Markets
Initiative, a group formed recently to advocate for the
interests of high-speed traders.