FLASH TRADING AND PREDATORY CAPITALISM—MY THOUGHTS.

FLASH TRADING AND PREDATORY CAPITALISM—MY THOUGHTS. I’m not sure that I believe in the usefulness of “capitalism” as a concept, but I do believe in the existence of predatory capitalists. Traders have always looked for an edge. Flash trading is just another example of traders–predatory capitalists–looking for an edge. Markets need good rules. I posted here about how the Chicago Board of Trade adopted rules in the 1840’s to create a Midwestern grain market, and I posted here about how Ethiopia was planning to imitate the Chicago Board of Trade in creating a grain market. One of the problems in Ethiopia that I described in that post is similar to a problem that was dealt with in England 900 years ago: the problem of forestalling, the practice of buying up goods before they reach market. Small farmers in Ethiopia “usually sell to the first merchant that comes along, leading to very low prices at harvest time.” In Ethiopia, creating a market would be a first step. Market rules have to keep up with technology, and it is interesting to see how quickly the SEC is acting on flash trading.