The Wall Street Journal reported that Mark Cuban is best-known for his success as a businessman and pro basketball owner. But in the past few years, he has also gained a reputation as one of the most prolific critics of high-speed computer trading.
Cuban has been following the market for years — and has had a few run-ins with regulators along the way — but only after the flash crash of May 6, 2010, when glitches in computer trading systems helped trigger a heart-wrenching decline in stocks, did he start to worry that something was amiss. Cuban, who made his fortune in the technology industry, says he was concerned by how prominent of a role computer trading had taken in today’s markets. Having seen how technology can easily malfunction, he worried that the market was far more fragile than many realized. He also questioned whether high-frequency traders, which send waves of buy and sell orders into the market, serve a useful purpose in the market.
Concerns about the impact of rapid-fire trading on the markets has ramped up of late, especially after technical glitches at Nasdaq fouled up Facebook’s trading debut. Last Wednesday, market honchos such as NYSE Euronext Chief Executive Duncan Niederauer were grilled by lawmakers in a hearing about the current state of the market. One clear message from the hearing was that a proliferation of computer trading and opaque markets has hurt investor confidence. Niederauer in his written testimony said a big factor in the waning confidence was that “an ever-increasing volume of trading in equities occurs in dark markets.”