Scott Patterson

staff reporter at The Wall Street Journal and author of Dark Pools: High-Speed Traders, A.I. Bandits, and the Threat to the Global Financial System and The New York Times bestselling book The Quants.

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scott_patterson91 karma

The regulators need to get on top of what's going on and fast. The public is losing trust in the markets and right now our regulators can't give them any assurances that they're wrong. Right now we just don't know and our regulators don't either -- that's why the market is dark.

scott_patterson81 karma

Good question Mom.

scott_patterson62 karma

I think there are some good well-intentioned people at the SEC and other regulators. But they're totally outgunned. And the financial incentives just aren't there. If you have the technical ability to understand much of what drives our markets, you're more than likely going to cash in for a multi-million dollar paycheck on Wall Street than work in the SEC. Sure, it's always been like that. But because the market is so technical, so computer-driven now, that our regulators need to have that technological literacy or they can't surveille the market.

Bottom line: The SEC needs to hire more quants and fewer lawyers.

scott_patterson44 karma

He actually read it! Unlike most of the people who interviewed me. He's even more skeptical of what's going on on Wall Street than me. And I'm pretty damn skeptical.

scott_patterson44 karma

I'm not surprised that the NYSE went for this because they've been getting taken to the cleaners by the firms that are allowed to do this. So it doesn't really change the overall structure of the market that much. I can say that I was surprised that the SEC approved it. It means more fragmentation--and we already have about 70 venues to trade stocks today. Isn't that enough? Or I mean far far too much?

scott_patterson41 karma

Well, we don't have much choice to we. But I'm trying to say that the market has changed in many ways, dramatically. This isn't the same market that we've had over the past 80 years.

scott_patterson38 karma

That is and should be the purpose of the market--to allow companies to raise money so that they can expand (and hire people) and let people get a chunk of their growth and profits. But the market has turned into a casino. And big shock--the computer revolution thas has taken over the market grew out of so-called SOES bandits, day traders riding stocks for short term gains. Check out Dark Pools for the whole story--no one has told it before. It's totally fascinating! (Sorry, had to get in a random book plug....)

scott_patterson36 karma

Pretty awesome, and smart. His brother Larry Leibowitz, who I know and is a top executive at the New York Stock Exchange, is also a really smart guy--and funny too.

scott_patterson33 karma

First, thanks for the compliment on the Island chapters--I loved writing about it. Josh Levine (founder of Island) is a fascinating person. Second, I think my book is the best book on the market about modern microstructure that everyday people can read and learn from. So we plainly disagree! It's a controversial topic and if everyone agreed with me it would have been a really boring book.

scott_patterson28 karma

Greed and fear run the market. But we need strong regulators to keep it in check. But the dramatic technological evolution in the markets in the past decade has left the regulators in the dust. I think they hoped that with the robots in charge they could just sit back and relax--but the robots are at the end of the day doing the bidding of humans. Often very greedy ones.