In late July, New York Senator Charles Schumer threw down the gauntlet to SEC Chair Mary Schapiro, demanding the agency ban the practice of “flash orders” or he would offer legislation to do so. Flash orders are “orders that flash in milliseconds to only a select group of market participants which can disadvantage other investors,” according to an SEC statement.
Schapiro in a statement said, “I am concerned about the issues presented by dark pools as well as flash orders. Earlier this year, I asked the SEC staff to conduct an overall examination of dark pools. This included a review of flash orders by exchanges and electronic trading systems. Since that review was undertaken, I have asked the staff for an approach that can be quickly implemented to eliminate the inequity that results from flash orders.”
In an attempt to get in front of the debate, Joe Ratterman, chairman, CEO and president of BATS, put out a statement supporting a ban on “flash” orders (BATS refers to these order types as BOLT orders) and challenging other equity exchanges to do the same.
Despite his challenge, Ratterman defended the order type and noted that they had been misrepresented. “There are accusations being circulated recently that are distorting the perception of how these systems actually work,” Ratterman said. He argued that comments stating that these orders were opportunities to front run and disadvantaged retail trades were false.