>> time now for final trade. >> dr. jay? >> bank america. settlements good for them, too. >> and the vote is good for anthony, that does it for us. a special edition of "power lunch" is now.

>> it was a wild day. >> wild it certainly was. hello and welcome to studio b. and we have a special set for a special show based on a very important topic to traders and investors large and small. the topic is high frequency trading. three years to the day since that 2010 flash crash, which many people blame on high frequency trading. what has changed? are the markets safer now? who is operating the computers and how is this new form of trading being policed. s is it killing it? we have a guest on both sides of the issue.

>> how a stock trading has changed dramatically. >> there are conflicting accounts of what caused the flash crash. one thing that nobody disputes is that trading is now an int gre gal part of the trading system. >> high frequency trading sounds mysterio mysterious, but it's fairly simple. it all starts with a man-made al

go rhythm. a computer program that will buy and quickly sell it again at a profit, usually for just a pen any. those orders can be sent out to multiple sources. the name of the game is volume. >> thanks to this type of activity total trading at the new york stock exchange went from roughly 2 million shares a day to over 4 million interest.

>> for example, there has been allegations that some traders submit and cancel orders to cause others to trade more aggressively than they normally would. there is also allegations that these traders have an unfair advantage. because they rely on super fast training, they have sought to put their service to cut down on the time it takes to send and receive information. some have proposed that there be some kind of speed limit that prevents trading in micro seconds, raising the question, how fast is fast enough? while there are mr. complaints, others worry that if they were

completely removed, trading would be so thin in some names, the volatility would increase, replacing one problem with another. >> there are no indications that the sec plans to ban or greatly restrict their activities, at least not yet. >> perfect segue. the next part of our special coverage does resolve around regulation. what are the rules of the game and where does washington stand? here is the next part of the story. >> regulators here are working on a wide array of technology issues.

>> there are not any limits on .

>> warn buffet has made millions by investing in the things he knows and loves. but what does he think of high frequency trading and software? we spoke with the man himself earlier this morning. good to see you, becky. >> good to see you, too. you know this conversation, it actually began here in omaha back on friday.

>> spend enormous sums of trying to get speed of transmission. that's a millionth of a second or thousandth of a second. it's not contributing anything. >> i don't think trading in and out of the market with high frequency makes sense for most peop people. >> you don't have any problems with this. you did not get burned by the flash crash. their advice is buy and hold.

>> with me is one of the bigger players. his firm trades one to two billion shares a day. that's why he is involved with the high frequency traders. he runs in exchange. people in the united states have no idea how this works. bill, you heard what warren buffet just said. that it adds nothing to capitalism. bill gates says it's akin to loss vegas. >> what i heard is that if you're a long term investor, the changes has very little to do with where you should be allocating your assets. >> that has changed a lot. i think the biggest message is

that high frequency trading doesn't really impact where you should put your money and the amount you should get over time. >> it's a neutral in your view? it doesn't give somebody an edge that another player doesn't have? because they don't have access to the same computer program? >> when you're talking about a long term investment in their 401k account, absolutely not. >> they are going through a

broker that has computers that are just as fast like it really has. >> i think we can agree that technology has improved the experience for investors across it. using banking and so on and so forth. it's been a good thing. but it's not an unmitigated positive. are you saying if i'm a customer of pick your favorite broker age that i have the same level of speed and access available to me? >> you have the same technology available. you're going to use it in different ways. you definitely have people working for you as you see it. >> let's move away from the

questi question. >> has it changed the perception of market fairness? >> it has. >> in a good or bad way? >> it has degraded it. in some ways that criticism has been fair. number one, new technology gives you new ways to do old bad things. just as e-mail brought spam and identity theft, high frequency train i training i think the weakness is that we had not taken that technology reassess it and make

are we safer than we were? >> we are much better. proctor & gamble dropping in 15 seconds. >> just in the last few weeks where stocks stay within a predefined trading range and can never trade outside. that's an example of the exchanges. working very closely with the sec. using technology. technology isn't the problem, it's the solution to making sure our markets work more efficiently. >> thank you for being with us. we appreciate your contribution. >> thank you. >> sue. >> tiler, thank you. when the markets started

plummeting, jim cramer was on the set commenting. watch. >> machine is obviously broke. the system broke now. >> now -- look at this. >> but now it -- there should be an investigation. >> the machine is broke. you got your opportunity. monday the machine is broken. >> we should talk to duncan. >> let me just say -- >> credit where credit is due. jim is with me you were the first to spot the problem. do you think that flash trading contributes to a fair market system or not. >> the government has blessed it. there have been many investigations where it's a he said she said. i think that it has not really helped. there are certain people who benefit from it.

we drove a lot of individual investors away. we have had a series of little ins tents. these people are very powerful. i like my shows stand for the individual investor. but i clear ly slow down the financial innovation. i'm with warren buffet. he says it doesn't really help. the idea that the capital marks are supposed to add anything, that was like the old days. we have got to accept the charge. >> i still don't understand why it's not considered front running.

if somebody gets something before somebody else, to me that is front running. >> that is the average person's definitio definition. i think the common sense has been thrown out the door. the government believes in what the high frequency people are saying. it really doesn't matter. i don't want to be too cynical about this but this battle has been lost. you should presume this is going to happen again. you can't trust the rules. and take advantage of it. >> again, his system is probably set up to have a split second or

less better than the individual. but again, you see if i disagree with him, he will just come after me. he will say listen, you don't realize they cannot believe that they sold at the bottom. sure they had the speed. the speed work gets them. we have lost the debate. it's over. the ceos who run these buy backs, they should be down there. have it so at 40 you have 50,000. and everyone can take advantage. >> don't work against the system but work with it.

>> the sec has blessed his way. >> i got so many fights. this is what i lost. >> attacked the stock in a heavy duty way, basically saying it should be in half. >> usually those who are, let's say shady, don't come on immediately. >> that's right. >> acknowledge he's in charge.

>> thanks so much. we will see you later today. ty? >> thank you very much. sue, you know about the big flash crashes. the market glitches that shake the indexes up and down but what about the smaller and very expensive market problems? they happen a lot more often than you think. but may have cost you lots of money. also ahead, a software engineer specializing in trading platforms that says beware of the machines.

>> today we explore the machines, their influence in our markets and how they can change

fortunes in the blank of an eye. >> you can predict what dumb people would do to skim money off of them. >> that's not a market. that's a game. >> free markets, fair markets continues right now. >> we want to show you some smaller less noticed but still very important minicrashes that have cost an awful lot of money over the last few weeks. >> today is the third anniversary of the 2010 flash crash but in addition to that history making free fall, there are smaller flash moves almost every day that analysts argue erode the confidence of investors. employed different parameters to screen for examples that drop or pop in the stock and involve a number of trades, not just one

bad tick. a dramatic swing in its price. highlighted three examples that all took place this swing. next, on february 26 tanks 2% and finally google on april 22, the stock opened at 803. then nose dives and immediately yoyo higher. they have lost faith in the integrity. such flash moves like the ones in google as for high they do disagree with the cause.

general investors are notes inially harmed. a stock is ultimately going to get priced according to supply and demand. the founder of the firm is here today. and he said electronic trading did bring down costs. the market has been turned into a computer game and jim is a professor at georgetown university. he believes speed does not necessarily give any set person or group an advantage.

you look like you're on the set of the dating game. you say that high frequency trading has brought down ethics. >> my biggest contention is there are groups out there not following regulations. >> they are taking advantage of that? >> the holt brothers were fined for putting in 12 fake quotes. >> is it the speed that causes that? or is that apart from high frequency trading? >> it is about putting in orders to try to find out what other algorithms are out there. nothing to do with buying and

selling stock. you say there are conflicts of interest involved. i suppose i could argue that if i have a faster computer, isn't that the way that capitalism is supposed to advance? >> we traded on the first electronic trading firm for years. there is basically a mouse trap that is not available for regulation institutions. take the regular investor goes to buy a thousand shares. he posts a bid. is he going to get that? probably not. somebody is going to run ahead of him.

the problems are deep rooted. it is about all of the problems that the stock exchange helps create. like so much distorting asset pricing that will tha will creep up and people will realize we should have done something. >> what do we do? we take that mistake that's what they do. so why shouldn't they want to facilitate that? >> let's take a look.

a joint panel six months after the flash crash put out a piece and they said in the absence of extraordinary events, books can empty and crashes can occur. >> jump in here. you were just nodding at what he was saying. we live in a technology world now. technology has changed everything. our cell phones have more computing power than we have launched rockets to the moon with. but our markets fail in different ways which is one of the reasons that i walk around with a cell phone charger in my pocket because the battery keeps dying. >> okay. i get it. >> it's different.

mostly better. but it fails in different ways and we need to be aware of the fact that it fails on different ways. and we need protections in place. that's really the job of the market to find the right price has this made the markets fairer or not? it's far better than it ever was before. is it different? yes. do the high frequency traders

have an advantage? yes. in the old days people used to pay extra to get a spot on the stock exchange floor to be close to the center of trading. now they pay for their computer. people have always been able to pay for an eng. >> can that flash crash happen again? >> absolutely. >> you're nodding. absolutely. >> you go to europe. >> you would, i assume, take the point of view that trading has made the markets anything but fairer.

now they get all the benefits. >> they limit themselves all to no faster than one. so why. we need to distinguish between good and bad uses of fast computers. >> we don't have them now. that would be your point of view. >> appreciate it. >> when we come right back, the woman who directed and produced a new movie. it's called ghost exchange.

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>> you have got so many people to cooperate with you, which is a fantastic thing. but it sounds as though they really wanted to elevate the conversation around high free kwenty trading. is that the case? >> absolutely. it is a really complex conversation. we don't like it type of thing. and really the goal was to bring that debate and conversation into a bigger spotlight and more into the mainstream. >> as you finish the film and you look back at what you learn

from the hours of interviewing and shooting that you did rrks you under the impression that t the. you can see how quickly those read those types of things. i feel we have opened ourselves up to be susceptible and to be possible

possible. >> we have plenty of pages in dod frank, and other huge market reform regulations. we figure out how much trouble we go through. >> after a quick break, what friday's jobs number means to all of the men and women on wall street who anticipate growth in the united states.

>> let's get to the action. we're up about six points. some sectors are now catching up with the rest of the markets. and again, the dow transports on an intraday basis earlier. the banks are market leaders. what is lack something consumer and drug stocks. we have the interesting rotation that goes on in the markets. today those stocks which have

been very big a couple of weeks ago are lagging the markets. consumers are buying less expensive chicken over beef and pork. they had heightened chicken and beef prices last year. there is push back. consumers are more sensitive on prices. >> thank you. appreciate it. to scott who has breaking news for us. >> a saga of harrisburg, pennsylvania, the near bankrupt capital of that state.

harrisburg has no money to pay a penalty. not that they admit that they did.

>> open it up to the 11th of april and we're at the highest yield since and it will be a while before we change that count because april 11th will close at a 179 yield. technically it seems to be in a congestion mode. let's go out. one to test the 100 level. one of the dollar index has been a bit on the slow side.

>> take it away. >> i get to read these guys. investors who are positively up, economists are much more fickle. they a. >> that's really helped by one guy in there. the guys that ubs are pretty upbeat.

>> the question is which series adjustment like whether payrolls adjustme adjustment. >> you very quickly on friday pointed to that hours work number that was coming down.

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>> to reject three board members that are up for reelection. >> and san francisco is re-evaluating. >> phil lebeau, why is the industry paying so much attention to this one? >> because trucks are red hot. and luxury trucks? they are among the hottest. we will explain why chevy is finally getting into this game when power lunch returns. [ male announcer ] my client gloria

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>> here it is. it's going to be rolling into showrooms this fall. when you look at why they're doing this. similar ly similarly. >> for him, it's especially important. give than 25%, they are upscale models like the king ranch. ford pick-ups have about a $5,000 price advantage over the chevy models and one reason why is because they are selling more of the upscale models for more than $40,000 a pop.

>> the stock has not really moved all that much. we will tell you why, next. it's monday. a brand new start. your chance to rise and shine.

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>> bmc agreed to be bought by a private equity group. >> street signs begins now. >> what a difference three years makes. three years ago today, the infamous flash crash spooked the world, but here we are, more than 4,000 points higher than then. you won't believe what bill gates said about the ipad, the founder of microsoft's bold call kind of against apple. you might want