SEC Looks to Prohibit Flash Trade, Curb Raters

[Tilted]

SEC Looks to Prohibit Flash Trade, Curb Raters - WSJ.com

WASHINGTON -- The Securities and Exchange Commission proposed banning flash orders, which give certain large traders sneak peeks at market activity, responding to concerns that some investors are getting an unfair advantage.

In a flash order, a firm wishing to buy or sell stock can elect to freeze the order on an exchange for as long as half a second. Critics say this gives a select group of high-speed traders a window into the direction of the market and lets them make lightning-quick trades to profit.

SEC Chairman Mary Schapiro said flash orders may result in a "two-tiered market" and noted "the interests of long-term investors should be upheld as against those of professional short-term traders when those interests are in conflict."

...

The SEC also passed rules aimed at reducing conflicts of interest at credit-ratings firms, which have been blamed for contributing to the financial crisis by giving mortgage-backed securities and other products rosier ratings than warranted. The agency also voted to eliminate credit ratings from certain SEC rules, hoping to foster more due diligence by investors and less reliance on ratings.

Regarding so-called 'flash trading', I don't think it's a major cause of problems in the markets. Nevertheless, I tend to agree with the idea or eliminating or limiting it.

With regard to ratings - the whole thing (the way they are done and used) is a joke.

Let's buy some of that XYZ security, I think it's a safe investment - after all, it's rated AAA by the rating agency that was hired by the people trying to sell it.

 

[Larry Gude]

Nothing like plugging the little holes first when the dike is a mess.

Now, on to Glass/Steagal...

 

[Tilted]

Moody's Accused of Issuing Inflated Ratings: Report

A former analyst with Moody's has accused the credit ratings agency of issuing inflated ratings, and has taken his concerns to U.S. congressional investigators, the Wall Street Journal reported on Wednesday.

In a letter dated July obtained by the paper, Eric Kolchinsky accused Moody's Investor Service of issuing a high rating to a complicated debt security in January, in spite of it being aware it was planning to downgrade assets backing the securities.

"Moody's issued an opinion which was known to be wrong," Kolchinsky wrote, along with detailing other instances of inflated ratings issuance, according to the paper.