SEC official: Markets aren't fair for the 'little guy'

Dan Gallagher says he thinks his agency will examine how it handles ultra-fast computerized trading.

By MSN Money Partner Mar 28, 2014 2:27PM
Image: Stocks circled in newspaper (© Digital Vision/Getty Images)By Jeff Morganteen, CNBC

SEC Commissioner Dan Gallagher said Friday he believes the perception that high-frequency trading hurts the "little guy" has become reality.

During an interview on CNBC's "Squawk Box," Gallagher said he feels the SEC should review how it handles high-frequency trading some time this year. 

The practice, in which investment firms use algorithms and powerful computers to automate trades in milliseconds, has come under scrutiny because critics say it creates unfair advantages over investors without super-fast processors.

"The problem with high-frequency trading right now is that there's a perception that for the little guy, the markets aren't fair," Gallagher said. "That perception to me is a reality. It's something we need to address."

Gallagher, an SEC commissioner since 2011, told CNBC he believes the regulatory agency will examine how it handles high-frequency trading this year.

"It's just gotten too automated," Gallagher said. "It's gotten automated because of our own rules. It's time that we do this."

His comments come a week after New York State Attorney General Eric Schneiderman announced he would open a probe into computer-driven trading. On Thursday, Nasdaq-OMX CEO Robert Greifeld said that an outright ban on high-frequency trading was unlikely.

—Reuters contributed to this report.

More from CNBC


Mar 28, 2014 2:46PM
Nice of MSN to finally make good on what everyone else has known for years.
There is no more 'little guy'.  Probably, 75 percent of the money is in huge
pools, driven by a handful of fanatics and their computer programs.

Why should the retail investor think its wise or safe to return that playing field?

Mar 28, 2014 3:00PM
How can the small investor compete with computer buying and selling with no fundamentals, only gaming the system for small discrepancies in price, extracting tons of money from who's pockets?
Then the same people call there profits carried interest and pay a smaller rate than actual working folks and their investments.
They crashed the economy.  They forced people out of their homes, then came in bought up the distressed properties a basement prices, to rent peoples house back to them. 

   The tide will turn.  Lets return to Eisenhower's tax rates.
Mar 28, 2014 2:58PM
About all the "little guy" can do is hope he is invested the same way the "big guys" have decided the market will move.
Mar 28, 2014 3:16PM
what idiot does't know that.   any boob that thinks he can out play the market or the big boys is P. T. Barnums dream customer.  If the average guy doesn't adopt Warren Buffets approach to the stock markert they are stupid.  you buy long term... and buy what makes sense and what you know...   
Mar 28, 2014 3:55PM
Those of us that invest in securities know that every transaction we make is subject to a Tax statement.  I have asked how these guys get away without reporting every trade and I get no answer, shrugged shoulders.  So just that mandatory item by itself makes high frequency trading unfair to all of us that have to report every trade. Nevertheless this thing really messes up the flow of trading prices (especially when they are dealing with .001 cents).  There is a lot of money here so I bet this guy is getting a lot of pressure to back off right now.  To few people controlling to much of the market without having to touch or be responsible for any of it. How about a citizens initiative because I know the congress won't touch this.
Mar 28, 2014 3:17PM
as a longer term investor, i am still much more concerned about the integrity of merrill,lynch, ubs, morgan stanley, wells fargo and other financial services firm. it is very difficult to ascertain exactly what fees and expenses your are paying, the fairness of the order execution, the unnecessary time holds placed on you and other collateral burdens imposed by the industry and condoned by the regulators. these barriers are much more burdensome than high frequency traders. i hope mary jo white stays at the sec long enough to provide some integrity and stability.
Mar 28, 2014 3:19PM
Nothing will change. Everyone knows that. Boycott wall street.
Mar 28, 2014 3:30PM
This is news?  It's been true for decades, going back to 1929 at least.  Information has ALWAYS been available to the big institutions before the retail investor gets a hold of it.  In fact I would say the house advantage in older days was much better because trade commissions were much higher. 

Hey, remember the days you actually had to pick up the phone and call your broker to do a trade and the commission was anything from $25 to $75 on the transaction?  Raise your hand.
Mar 28, 2014 2:46PM

The world isn't fair, and it is futile to try to make it that way. 


The more regulations you create, the bigger the advantage shifts to the big guy since they have the money to invest in searching for loopholes.


Mar 28, 2014 3:37PM
High-frequency trading is not feasible for small investors. We should work with major market movements, buying stock when it is cheap and selling stock when it is dear. By following that one simple rule and investing only in well-established companies it is almost impossible to lose. The downside of this method is that one grows wealthy very slowly. 
Mar 28, 2014 4:21PM

Remember those billion and trillion dollar bank bail outs? The one where the incompetent and down right crooked were rescued by tax payers?  Tell me, if the same money, those billions and trillions, had been divided up equally between ALL the tax payers on the country....with the stipulation that if you had miss managed your money, or miss judged your ability to repay things, or were just plain stupid, you know, like those moguls, and gotten behind on your house or car or credit card payments,

 that you HAD to pay back the loans to the banks.  Wouldn't THAT program have bailed out the banks? i mean all those loans would have been paid back right?  So, along with the banks, ALL the people would have been bailed out too instead of being left not only still behind on all the payments  but now on the hook as tax payers ultimately responsible for the government debt too.

Oh, and for the people, well, like myself and probably most of you, who never were behind, or even in debt... well, they could've stipulated that we at least buy a new car or spend some of the money as a STIMULUS to the economy. sounds like a better plan than cash for clunkers which moved people out of their paid for clunkers into debt for a not needed new car.

Just askin'

Mar 28, 2014 4:02PM
The big guys do the buying and selling and they just take us along with them.
Mar 28, 2014 4:47PM

No way the heck we can compete. That's why I have to buy and hold for a long time horizon.




At least 160.45 milliseconds...

Mar 28, 2014 4:45PM
Black pools and computers that trade ahead of the market are not what makes a fair and open market place for publicly listed stocks. Quick profits for some but a loss of confidence in the system that will, in time, cause the public to depart.
Mar 29, 2014 12:39PM
All trades should occur at the same speed!
Mar 28, 2014 4:02PM

It's not fair - lol,

My kids say that 100 or more times a day. I tell them that's right, so when you grow up you have to elect democrats because they will make life fair.

Mar 30, 2014 6:31PM

The “Little Guy” can still do quite well investing in the market. The big guys do have an advantage when it comes to trading, but “little guys” shouldn’t be trading anyways, they should be investing.

Mar 30, 2014 11:47AM
If you bought an index fund when Obama took office you`ld have doubled your money.What`s unfair about that?
Mar 29, 2014 1:16PM

I'm just going to guess, that the SEC will talk this to death for a few years....

Giving lip service to the masses, until we shut up...And trading will go on as usual..

Nothing less than 5 second trades period....!!!  What ever that really means..?

No instant pump and dump....

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