Say goodbye to the Stock Exchange

Say goodbye to the idea of effective financial regulation through the Dodd Frank mechanisms or any other.

    The New York Stock Exchange and Euronext are in talks for an $8bn exchange merger [AFP]
    The New York Stock Exchange and Euronext are in talks for an $8bn exchange merger [AFP]

    Last September, I was back on Wall Street for what might have been the final hurrah of the Occupy Movement as a force that confronted the power of high finance in the name of the 99 percent.

    Thanks to a police overreaction, many of the employees at the New York Stock Exchange couldn't get to work in time because the financial district was occupied by armies in blue sent there to defend it from its righteous critics.

    The Stock exchanged lived to trade another day, but just a few months later, the symbol of capitalism that it represents may be ready to shuffle off our mortal coil. Talks are in the works for the Exchange which saw so many booms and busts over the years, to be merged with, heaven forbid, Europeans or at least a company called "Euronext".

    Wall Street is the land of dreams and deals. But this one involves $8.2 billion from an outfit called the Intercontinental Exchange, or ICE (no, not the ICE immigration police that deport illegal aliens). How in this time of austerity and structural unemployment did these wheeler dealers come up with $8.2bn bill is not even a question being asked.

    The New York Times was incredulous: "It sounds preposterous. A businessman from Atlanta blows into New York and walks off with the colonnaded high temple of American capitalism….his $8.2bn transaction... will close later this year. And with that, 221 years of Wall Street history will come to an end."

    What seems to be happening is that stocks are now out, and derivatives are in. In a side deal, The Knight Capital Group (Knights like in the middle ages?) will be sold for another $1.4 billion to Getco, a company that we know little about because it is privately held.

    Getco has been deep in the mysteries of high performance trading in which super speedy computers replace people buying or selling on microscopic price variations. Since this story broke, there have been many reported scandals about the unreliability of high performance stock trading.

    Lawrence Baxter, a professor at Duke University, writes that this technology is unstable:

    I don't care what a CIO or even a CEO might say:  if they claim that they can eliminate the real risk of such missteps, they just don't know what they are talking about no matter how good they are. And if such missteps are inevitable, then we simply cannot avoid the question whether the dangers posed by large, complex financial institutions and systems could outweigh their benefits.

    What we face here is not only the eclipse of stocks and equities but their replacement with even more risky and speculative programmed trading that moves so fast that it can't likely be regulated effectively, although the wheeler dealers behind this "innovation" say that the Dodd Frank "reforms" will help them.

    People & Power
    Prosecuting Wall Street

    What we have here, according to the editorial wags at the New York Times, is the creation of the "world's largest derivative market operators" and the "most dominant stock traders, who would take advantage of securities regulations that have encouraged the development of alternative trading systems".

    Say goodbye to the idea of effective financial regulation through the Dodd Frank mechanisms or any other.

    The fact that this was happening in the week that the government finally decided to prosecute some bankers for their LIBOR transgressions shows how the guys on top remain on top by thinking and planning ahead.

    Government regulators are no match for their cleverness and their shrewd capacity for accumulation and extraction, as big money making there is described.

    Americans for Financial Reform, a public interest group trying to keep up with all this, seems to be fighting the last war given these new developments.

    They just issued a statement [PDF] condemning the Libor scandal that the next one is likely to dwarf, writing:

    The revelations of brazen criminal behaviour and blatant conspiracies by major banks continue to roll in. The latest involve the Swiss bank UBS and the LIBOR price-fixing. LIBOR is a central interest rate for the global economy and a critical input to everything from consumer lending rates to foreign exchange transactions to customised swaps used by municipalities. UBS traders conspired with other financial market participants to rig the LIBOR rate to increase profits and take advantage of bank customers and counterparties.

    These actions run far too deep and are much too extensive to be written off as the behaviour of a few "rogue traders". In case after case - ranging from the mispricing of "toxic assets" prior to the financial crisis to huge proprietary trading losses to rigging the LIBOR - we have seen evidence of a bank profit model based on systematic deception and corruption.

    And yet we still have media talk of the need for self-regulation, not tough enforceable rules even as the "quants" - PhDs in mathematics - take over from the wheeler dealer banksters in determining the future of finance.

    The New York Times has now enumerated the many ways this deal threatens taxpayers and investors, noting that  "regulators have made little progress in developing rules to monitor and control high-speed trading".

    Their conclusion is that "the mergers should remain on the drawing board unless and until regulators can reassure the public that the newly created companies will operate not only for private gain, but in the public interest as well".

    Fat chance. That's like the little Dutch boy with his finger in the dyke. Technological innovation has a way of sweeping its detractors away.

    Big money talks as does the promise of "modernisation", which is exactly what the reformers during the Clinton Administration pledged when they deregulated all the rules and led us into the financial collapse from which the world has yet to recover.

    Perhaps, by the second anniversary of Occupy Wall Street, activists will finally get into the NYSE building and find nothing there but some wires and satellite dishes linked to offsite computers in some off-shore location. This is exactly what is inside the NASDAQ building in Times Square, which to the public looks like the headquarters of an exchange, when, it fact the computer-run company is run by technology, not people.

    Capitalism is marching on, and leaving its familiar trail of goodies for the few and deprivation for the many.

    They are already calculating the hundreds of millions in "break up fees" that will have to be paid if the mergers fall apart. But to put a smile on our faces, the Dealbook section of the Times reports:

    By the way, it appears that the deal's architects are sports fans. The document refers to NYSE Euronext as the "Yankees", for obvious reasons. ICE is named "Braves", after the Major League Baseball team in its hometown of Atlanta.

    These names are probably the only part of the deal the public will relate too, although if you follow the money, it appears that the South is rising again!

    That's about all that ordinary people will comprehend about the complexities of this mother of all deals that moves the money world into the next world.

    News Dissector Danny Schecher blogs for News Dissector Net and edits His latest books are Occupy: Dissecting Occupy Wall Street and Blogothon. He hosts a show on Progressive Radio Network ( Comments to



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