What’s Worse Than Ticket Scalpers? Stock Scalpers.

Sarah Anderson Co-Editor, Inequality.org

nternet bots immediately snapped up Beyonce’s presale tickets last year. And when the resale price rose above $1,000, the Beyhive was mighty peeved.

Ticket scalpers are indeed frustrating. But their Wall Street cousins — what UMass-Amherst professor Douglas Cliggott calls the “stock scalpers” — are far more dangerous.

Like online ticket scalpers, these financial predators use advanced technology to cheat the rest of us. For huge sums, they buy the privilege of locating their computer servers as close as possible to market exchanges. This allows them to get trading information a split-second faster than traditional investors.

So when a mutual or pension fund makes a trade, the stock scalpers see that trade on its way to the market. “They hop in front of it, buy it, and bid up what we want to buy and sell it back to us at a higher price,” explains Cliggott, a former JPMorgan Chase managing director.

The scalpers do this thousands of times a day, using computers programmed with algorithms that have no connection to the real economy. This “high frequency” trading makes up the majority of today’s market activity.

Many financial experts, including a former CFTC chief economist, have warned that high speed trading siphons profits from traditional investors. For the minority of U.S. workers who have any money at all in a retirement fund, that’s a bigger problem than missing out on a Beyonce concert.

Even more disturbing is the risk the high-speed traders pose for the global financial system. John Fullerton, another former JPMorgan Managing Director, points out that high frequency traders vanish from the market in a flash in times of crisis. “This can trigger a cascading effect as real money investors pull back in self-defense and at times flee in panic,” explains Fullerton, who currently leads the Capital Institute.

Jean-Philippe Serbera, a financial markets expert at Sheffield Hallam University, views the threat of a major “flash crash” as more likely today than during the relatively calm bull market of the past several years. “In a more depressed market, where there’s inevitably more volatility and traders are more downbeat,” Serbera says, “the worry is that flash crashes are more likely to get out of hand — possibly causing contagion around the world.”

There’s an easy solution to these problems: tax the stock scalpers.

Posted In: Allied Approaches

Union Matters

He Gets the Bucks, We Get All the Deadly Bangs

Sam Pizzigati

Sam Pizzigati Editor, Too Much online magazine

National Rifle Association chief Wayne LaPierre has had better weeks. First came the horrific early August slaughters in California, Texas, and Ohio that left dozens dead, murders that elevated public pressure on the NRA’s hardline against even the mildest of moves against gun violence. Then came revelations that LaPierre — whose labors on behalf of the nonprofit NRA have made him a millionaire many times over — last year planned to have his gun lobby group bankroll a 10,000-square-foot luxury manse near Dallas for his personal use. In response, LaPierre had his flacks charge that the NRA’s former ad agency had done the scheming to buy the mansion. The ad agency called that assertion “patently false” and related that LaPierre had sought the agency’s involvement in the scheme, a request the agency rejected. The mansion scandal, notes the Washington Post, comes as the NRA is already “contending with the fallout from allegations of lavish spending by top executives.”

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Corruption Coordinates

Corruption Coordinates