thank. you. good afternoon and welcome to capital account i'm lauren lyster here in new york city for a very special show we have a lot in store for you because the e.u. parliament moved one step closer to an acting tighter bans or curbs actually i should say on high frequency trading a. to do so now add them to the list of countries that do not include the united states so why is this and why is the u.s. so behind the curve as our guest former nymex board member david greenberg says

we'll hear from him plus we saw oil rebound after it had closed its lowest in eight weeks and reportedly if you look at the headlines this is because of china and speculation about stimulus but really when you step further back what has changed so much in the world that oil has gone from fifty dollars a barrel in two thousand and seven to over ninety now just five years later maybe it doesn't add up we will hear from our guests and plus we are in new york on a day that u.s. g.d.p. was revised down one point three percent on an annualized basis that is not very much growth it is pretty paltry now a little bit of trivia nine hundred twenty nine stocks crash it saw effects in times square so we headed out to times square for a special loose change to see if we're seeing any impact from what's going on in the economy now let's get to today's capital account.

all right so as i said at the top of the show the e.u. parliament committee voted unanimously for tighter restrictions on banks trading in this included curbing high frequency trading they voted towards that now add this to a list of countries that have either proposed or an active bans or some kind of provisions regulating more tightly high frequency trading ok germany canada. also australia i believe so where is the u.s. on this list and why is it not on it especially after we've seen the flash crash of two thousand and ten and more recently the knight capital debacle well i'm in new york which means i had a chance to sit down with a real industry veteran oks a commodities and futures industry veteran he was the board member at the new york mercantile exchange and he was president of the ny mex clearinghouse so he really

has been intimately involved in monitoring these markets and seeing where regulation has faltered he says in the case of high frequency trading the u.s. is way behind the curve late to the party if you will he also said with all the focus on washington dysfunction directed at congress that's taken a little bit of the attention away from the regulators who deserve some of that scrutiny too but you don't have to hear from me here's more from him. and my real question to them was how could you be so far behind when you have other countries like canada and germany coming out being proactive and then you know the united states just you know months ago saying well we need to learn about this and then they just keep you know the big you have they have to learn about it but they should have known about it she should have been on top of it we were at the forefront the electronic trading we were the ones that where when it really moved in it kicked in specially with the chicago mercantile exchange with low backs this is been around for a while and for them to be this laid out it just you know it's got to scare the

investor kind of as a whole and just to clarify when you say we knew this was going on we knew about this who you're referring to well as an exchange you know board member the only board member i think in the world that ever voted against electronic trade and i was worried about the volatility in the markets i don't think that the regulations were in place and i don't think them a lot of the markets were structured to handle this amount of our income in which we can which we can talk later so it's not a it's not you don't need to be a rocket scientist to have figured out that with this influx of speed and volume and money trading products that never traded these products before that there are going to be seditious yeah you may need to be a rocket scientist in order to program algorithms but you don't have to be one to know that there may be the wealth you absolutely have to have to tell you from the mind owns one of the largest high frequency trading companies in the world and it was i was lucky enough to go in and see this operation and i said so much we're going to go up and see your traders and he's like i don't have traders literally

have. made the joke of rocket science and i walked up there to have the conversations with these people and to see the operation that's on there after twenty five years of seeing how the floor worked and how normal commodities work it was it was a real eye opener and it changed my views on a lot of this interesting you know i want to go back to a couple of the things you said because one thing you said it was really interesting was there is a lot of focus. what's wrong with washington what's broken in a lot of our focus is on congress congress can't come up with a decision the administration and congress can't work together there is this dysfunction you actually think that that is distracting from major issues with say regulators where they're not getting it right it's kind of i was thinking europe is distracting from the u.s. as fiscal problems because europe such a disaster when the u.s. has problems of its own so in the same way is kong congressional dysfunction distracting from the problems of the regulator it's all these things that when the

parents are messed up nobody's watching the kids and if you have you really think about it you know the heads of washington as we've seen and we've all suffered from it greatly have had this gridlock and that filters all the way down but you know the other agencies don't get the press i mean we've had m.f. global we've had here we've had night these are all going to be little little new what i call little explosions before the major quake you know everybody looks at this that whole you know look how much money was four hundred million dollars was you know twenty minutes with night that's going to seem like nothing in the future if these regulators and the more kids don't get in line and sort of protecting the customer and you think that as a result of as far as the earthquake what would be the earthquake or or the what what cracks or what fault lines cause that earthquake is it high frequency trading is it derivative is that leverage is that a combination of everything so yes ok. it's all of the above you know when people

say that's all that's wrong is higher frequency trading well that's too narrow if people say all that's wrong with derivatives that's too narrow this is going to be a sum of everything and if you really put everything together it's very scary to see just how big it's become i think the markets the program in is have just gotten so far ahead of itself you know we've you know we kid around with my roommate when i was in that he was tore into the computer. school syracuse university and i he was brilliant and i said to him one day well we'll never see the technology in that's no one hundred years and we've seen the last hundred years so he says to me david they're making thing called microchip you're going to see more in five years and you have seen the last thousand and that's what's happened in the last five years here we've seen greater leaps and bounds in trade in and the river goes and the money that's coming into the market than we've ever seen and it's happened so fast that i just don't think that the regulators are up to speed and not only that you know it's very hard when you're you know paying the regulators you know their

staff what their opinion paid compared to what morgan stanley or goldman pay and you can't that's not an even fight you're not going to get that expertise you're not going to get that and regulatory bodies and what we're on expertise if i know you've been somewhat critical of the level of expertise somewhere like this the f.t.c. what kind of lack of experience do you think is there well what i find amazing is that myself and a few other people that i know that have broad experience in the exchanges and clearing and trading you know we offered to go down just talk to see if you see you know let's just you know sit down and we can explain some of the situations that are going on we're all you know that's great that's great but then of course you know we were you know rebuffed they didn't seem to want to hear of some of the hard facts and some of the true facts because the bottom line is you have republican commissioners you have democratic commissioners they were all appointed they all have to answer to somebody who then has to answer to a lobbyist and

a lot of these trading companies and a lot of these big banks have huge lobbyists in washington and yet you know you and i and i have to tell you something when it will if they stand up and say hey this is a great idea you should do it well then you probably shouldn't do it. because there are a great there's probably something going on right exactly right now let's think about what happens every time the regulators get close and it just happened again regulators get close to getting better. and i have to get admit they are learning the learning quickly however what we hear well we've just postponed that they have to follow it was rule one point seven three till next june of two thousand and thirteen it was just going to be implemented how many times we heard that when there's something that's just about to start well there's a postponement or it's been dismissed and to me you know that's just you know when i was on the remarks you know when on the board we used to say politics was a contact sport well washing the contacts has got to be ultimate fighting yeah you know because it's just when any whenever anything starts getting close it just gets

because it gets dissolved and i think that's in the long run really going to hurt you know not only the american people but i think it's going to be a world structure and i think it's going to be a problem ok i want to a piggyback off of that to get into swaps because that's an example of a regulation that's just been delayed regulators delayed the comment period for rules for swap dealers to hold more capital and collateral when trading an over the counter derivatives which are the riskier derivatives they are nontransparent swaps regulation was a part of dodd frank it's also taken a long time i think it wasn't that long ago that they just finally decided what constitutes a swap. one of the moves is to move its swaps onto exchanges is that. i thought accompli does that mean ok everybody back home derivatives we got to wait a minute mark no because what's going to have is you know it's

a great concept however it's not as easy said and done i mean again i don't think they're they've got a good grasp on the new futures markets and how to regulate them now they're put on this on a swat market that this simple swaps will be able to be put on an exchange but the exotic swaps and o.t.c. products you know there are there are products that have made i mean let's take clear for for for instance when i was on the board and we invented clear board you know everybody thinks that these exchanges and these trading companies make these products for the good of the people well no they're all for profit companies we created a clear port because we knew that the triple a company could not trade with a triple b. company there were borders wouldn't even talk so we invent fear port where they can do this trade drop what we call drop it down are not enough synonymous clears it takes all the risk well if you really think about it in the o.t.c. more hit last year there was i think actually there was two point six trillion

dollars in margin variation as a lot of money and wesson him it's a ton of money and what's also even more amazing that the notional value of the o.t.c. market is about seven hundred nine trillion dollars right so you put that in perspective if you have any kind of per cent small percent of a major player forget forget i'm a global forget knight this is going to this is going to go all around. all right now couple no it's clear poor that is a clearing service open to over the counter participants in the market just f y and also the regulation he was referring to it's a c f t c regulation for exchanges one of the provisions having to do with risk management clearing now still ahead do not go away we'll have more of my sit down with david greenberg on so watch and oil and you will not want to miss dimitri kofi and it's my heading to times square to look for economic indicators but first your

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all sometimes you see a story and it seems so you think you understand it and then you glimpse something else and you hear or see some other part of it and realize that everything you thought you knew you don't know. welcome to the big picture. all right welcome back so on any given day oil seems to make moves enough to be newsworthy and today is no exception we saw oil go up the most it has in eight weeks and this is after it had been falling now these are often attributed these moves to macro economic factors to supply demand conflict concerns

expectations of stimulus in an economy for example china which is what the headline reads today but let's look back at another headline let's just go to two thousand and seven it's just easy to pull up take a look at this ok this is just a few years ago or oil prices tumble briefly trading below fifty dollars a barrel so five years ago we had fifty dollars a barrel oil what has changed so significantly in five years that it now trades above ninety dollars a barrel as the world really changed that much we have wars we had conflicts that would impact oil prior to two thousand and seven so our gas has a really unique perspective because he has been in the trenches for a long time watching this but first we talked a little more about swaps and swap regulations and the the evolution of swaps and derivatives so more with david greenberg on that. so we're getting into this

exotic derivatives market now because it's kind of funny we went from derivatives to exotic derivatives well the it's just one more way for these traders and other companies to try to raise money for their for their balance sheets whether or not there's a real purpose for every swap and every o.t.c. product that would be an interesting question ok and the takeaway is that exchange is don't solve any of those issues and they also put into the equation a profit motive which would then what incentivize just more derivatives more market making for these kind of exotic derivatives exactly clear ports started out with i think fourteen products and that has three hundred you know exchanges bottom line when we all went public we all there was a shift. you know when you're a public you have to have your quarterly earnings you have to be your numbers every every quarter and your go in and with all companies not what i see and i think this is part of the problem that with a public company that even if they don't beat the whisper number they get they get

slammed in their stock price i think you're seeing exchanges in many companies not only exchanges but some big companies and we've seen this you know going through some of the public trading companies is that they take on do risk to try to lever up to try to beat those numbers and they probably would want high frequency trading to stay as it is the exchange is definitely one hundred it's a trade. off you was on from c m it was on with maria bartiromo the other day and i watched the interview and he was defending high frequency trading that is very good in this very thing that doesn't hurt the the the average trader and i have the agree with him i was completely against that but now if you take the high frequency traders out there are no more locals on the commodity floors and along with somebody like me that made markets go back and forth there are no more specialists on the floor of the stock market so if you took the high frequency trading out you'd have a bid and offer that a truck in the truck would go through and we just have a minute but where i want to bring this full circle to just show the impact of high

frequency trading i may be somewhere where people don't really expect it we've seen crude oil go down recently and now i think it's up a little bit today but it was an eight week low where we are this is often attributed to demand and supply issues macroeconomic conditions concerns about growth in china news of stimulus in china. war conflict you actually think that the rise that we've seen over the last few years which has been substantial you said you remember the day that oil was fifty dollars a barrel was a few years ago that i didn't know that everybody was like i can't believe it's a fifty dollars a barrel yet you say not that much has changed in the last few years except for high frequency trading so how do you think that that is responsible in part for it's not only the high frequency trading it's the electronic trading. to begin with you see the high frequency trading is trading you know within the day it's going back and forth that's why you're seeing these big swings but when we were in exchange and it was basically the two hundred of us in the pit that were crude oil specialists or locals that we call us and you have fiber and you goldman and morgan

stanley and they had a few hedge funds that were crude oil hedge funds that it was a much smaller niche market and the market you know we went through to go for as we went through some massive economic times and the market handled as far as you know there was there was and there was an even ebb and flow that went back and forth and a spike for us was two or three dollars over a week or so ok now what happened is that when we tried to imagine you had this little market here and then everybody could put everybody everybody in the world who had money could trade this market so now you have hedge funds that will never know what a barrel of oil is we'll never really know that exploration is on x. day and you have to be flat and all this other stuff but you have all this nass of amount of money flowing into a market that was never originally developed for this amount of market flow so what happens now is that you know it's not the supply and demand market that i traded

you know when i when i trade in crude oil was up two dollars but you know at the end of the day you could sell to the cows come home because the odds are it was going to be up to fifty now if we have two dollars at the end of the day and it could be up five dollars by the end of the day simply because when these electronic platforms come in and the algos come in and they're trading with other people's money and they're trading with an extraordinary large balance sheet it's just a momentum trade and think about it crude oil came off nine dollars a sleep eight or nine dollars give or take you really think the world's driving change that much within a week where it's going to be that much different in a month this expiration is only for i think it's two weeks from now you know i've seen crude drop nine dollars within three days of expiration expiration whereas that was where it. price that is very simple it's that last trading day that's going to be the price of that everyone is going to buy it the world did not change their driving habits that quickly there is a tremendous amount of speculation it's market now remember everybody hates speculators on the way up they can push the envelope doing that and they you know

it when you go the wrong way those drivers everybody because that is what worries them what worries me is like listen i love being short they used to kid around on the floor they knew the left side of my pad. i am a natural short it's more fun to trade a short market it's faster markets go down fast and they go up as a trader that's what we got our rush however we just came down these nine dollars what worries me is that there was a time years ago when i was trying to trading just started there was a rumor that israel was flying planes over to iran the market on a thousand contracts on our overnight outs a system that we had rallied five dollars well that was before all these big bangs that everything was planned what's going to happen if some kind of an attack i mean it could go where we think it will be at you know people get around about two hundred i have to be honest with you i think if you go to one fifty give or take before if there's a rumor if there's a real attack and something really happens there's there's nothing to stop this

market anymore and that's and that's the problem and it's going to and it's going to be vicious and we're going to have to leave it there but i appreciate you giving us all your insight david greenberg thanks so much thank you all right now stay tuned for a while back sir because there's a little more that interview on how high frequency trading impacts the retail trade or maybe not as much you as you would think but when it's a problem for everybody but for now let's take a look at loose change. morning here and you guessed it times where you can tell by the round i mean are. you going to be good. researching experience time i am not meaning stock market craft hit times square car is it bad like many businesses have to put down in his name was more entertainment oriented industry you can't. control people

think about higher so the story goes that the former mayor rudy giuliani really made an epic look at times square to turn it into. what is. i'm not a perfect person it gives me a manner of living to live. at home in a deep enough to cut. not eating during the whole time was on about anything i think then i just discussed our republic. and. known as the sun times square modify. my. house and indicators like that out in the theater where i'd like to have a life and i feel i am at bank of america which. merrill lynch i

think. there is morgan stanley. was that it. was at its banks what do you think that that are here and good times here and where women are going to be with her because it broke because i mean i you know i think that is the bank of america but the big word out of our more serious with us great reporting there is there are markets whose parents are this know they're thinking about sprays the fixer image up i think i assume that the more exposure of the more problems up for example more holidays the more problems there isn't called are in big trouble aren't i mean so slow to think that's actually. an indicator of her yourself to your iris or because you don't even ask for it but i want to get our next story could you eat meat. right up there and i. am i'm not going to another one of those electric. lights on a plane and there was a new york post today and i was looking at the not paper that's going to new york

by any of them but it's talking about it on my own i think making fun of oh ok still time for time. so. i'd make fun of something that waited to get my underwear on our i mean while a good technology already in debt and seventeen million on you tube and the minute that our parents would have done far less of it i think i play it up like a good start so what do you think that some things are going to look i'm going to decide reginald want to respect a lot of them have a show so i know who's who's horrible why don't they go price i promise i'm going with this will be honest doubtless that you're not a problem but i did truth although it's true although i'm not sure i did another no . mind p.r. public sector out to me people out there and whatever any help would this have happened if steve jobs still alive and we're seeing that with the snap there with

the i phone five now they've already google maps narrow minded general sure that's a good because you just look a little bit but the point is. bringing up with this is happening steve jobs are alive i mean if you can never understand i mean it's kind of factual you know a bit about that yes turner for example steve jobs was alive but so you think in this one no competition for apple i think that we're seeing worthless or you don't i mean are you going to tell you don't you know there's a growing underbelly we've got a lot more incredibly intelligent branding and bizarre terms you could actually convince someone of their drinking sand when they're drinking up and they're going to get water to drink and sat. there i don't know what you're saying but let's just go on one margaret. around here are where what happened here and just well before we go there's a story out there plenty by a household that's still like that we know that the make up problem that unemployment here just nine hundred twenty nine gave rise to new businesses to

force in times where we produce he had the opportunity for that to happen again with a weak economy throughout the solution but i use a peep show indicator i have peep show indicator in the us that's better canners i think until we see some real peep shows some real kind of you know dirt in times square we want to really thumb out bottom us all be looking for us i will start by you know what is going on here there are lots of the people showed up for the pizzas and believe me there about how we have time for our very special new york times square. you'll let us know what you think about the peep show indicator because that's all we have time for but thanks so much for watching and be sure to come back tomorrow. and you know in the meantime you can follow me on twitter at lauren lyster and go to our facebook and like it watch us on you tube or on hulu and be sure to come back tomorrow from everyone here thanks for watching and have a great night.