Is the Stock Market a Level Playing Field?

The New York Times EDITORIALS Monday, June 23, 2014

The Hidden Cost of Trading Stocks

“There’s no escaping the conclusion that the stock market is not a level playing field where all investors, large and small, have an equal shot at a fair deal.

A recent groundbreaking study found that undetected insider trading occurs in a stunning one-fourth of public-company deals.  Experts have long debated the pros and cons of high-frequency trading, another pervasive practice, but there is no doubt that it gives superfast traders the jump on others in trading stocks.  And the very idea of trading on a public exchange, where stock prices and trading volumes are visible to all, is being eclipsed by private trading of public stocks in 0ff-exchange venues, called dark pools, usually operated by banks.”

In addition, according to this article, stock exchanges pay rebates to brokers for sending them buy and sell orders.  Apparently, the rebates “are corrupting… A study from 2012 estimated that rebates cost individual investors, mutual funds and pension funds as much as $5 billion a year.”

It’s not just athletes who need a level playing field to keep games fair, investors need fair markets.

 

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