First, the risks of HFT are obvious when things go wrong and when algorithms become unmanageable;
Second, the rule-making for Dodd-Frank is taking so long that another crisis could occur before the new rules are finally completed. Besides which, many of the rules seem to have come from bank lobbying;
Third, there is still difficulty defining proprietary trading in a way that the new rules can be clearly applied to prevent it.
It is difficult to believe that such extensive rule-making over such a long period of time will ever come close to preventing another financial crisis.
One last prop trade for Goldman?
By Philip Scipio and Christian Murray - Reuters
NEW YORK, Aug 24 (IFR) - As US regulators put together the final touches to the controversial Volcker Rule, Goldman Sachs' third-quarter results are likely to reflect the benefits of one last proprietary trading hurrah from the purchase - and subsequent sale - of Knight Capital's accidental stock portfolio.Read the article here
Knight's trading algorithms suffered a catastrophic glitch earlier this month, buying stocks worth several billion dollars. The brokerage turned to Goldman for help and the investment bank is understood to have bought the portfolio at a discount. Analysts expect Goldman to pocket profits of between US$100m and US$230m after unwinding the portfolio.