Richard Rosenblatt, chairman of Rosenblatt Securities and an NYSE member since 1979, has attacked recent increases in automation in the US. Reg NMS, introduced last week, is designed to increase competition and lower the cost of trading, but Rosenblatt questions the extent of its benefits.
“The benchmark is whether automation makes the process more efficient but I suspect NYSE and the Securities and Exchange Commission have gone too far with the assumption that transparency equals liquidity,” he says.
Some brokers believe the regulations spell the end of open auction trading on NYSE, although Rosenblatt continues to recruit on the trading floor.
“We are growing our automated capabilities but we are also growing our presence on the floor as computers don’t do everything better. They don’t negotiate, share information or discover volume as well as people,” states Rosenblatt.
He blames the reforms for volatility at the end of February, when the Dow Jones Industrial Average lost 1.4% in a minute.
“The weakness made clear the risks inherent in making so many key changes to market infrastructure in a short period. Mandating markets to make so many changes has unexpected consequences,” Rosenblatt comments.