If the SEC was serious about tracking the actions of high frequency trading firms they would have implemented CAT already. CAT is an acronym for the latest SEC illusion of due diligence which stands for consolidated audit trail. This "trail" would be a system to monitor and analyze trading activity across U.S. equity and options markets.
The flash crash happened over two years ago in early 2010 and nothing much has changed except for a few more circuit breakers put in place like band-aids on a sucking chest wound. Everyone knows that if you want to get something done algorithmically, and quickly, there are no shortages of Scalosians willing and able to help with this task. I'm sure that the SEC is very busy. So much porn to download, so little time.
High atop the rainforest, I could sit here all day and criticize, but instead let me offer the SEC a little help.
1. Make sure you are well connected with your IT guy. He can help cover your porn trail much more efficiently than YOU can.
2. As for the consolidated audit trail, sometimes working backwards can make a task much easier to start, and provide a much needed short-term goal in the process. I say "short-term" goal because the words "long-term" to a government agency are synonymous with the words 'life-long', and 'never-ending'.
Here's where we can apply this backwards approach. Some of these HFT algos have had devious names such as "Stealth" , "Iceberg", "Dagger", "Guerrilla", and "Sniper". The SEC should consider actively seeking similarly cool names for the policing side such as Robocop, Judge Dredd, and my personal favorite, Spitzerman just to name a few obvious choices. Once this is done, the task of developing a system to monitor near speed of light orders (or pseudo-orders) will simply fall into place and usher in an era of the ultimate high speed, 21st century cat and mouse game...before the ultimate financial market implosion occurs, of course.
http://www.youtube.com/watch?v=jGqzVGJ9bGg
Who wouldn't want a 21st century order tracking, policing super-system to play with?
At the very least, they might spawn a whole new cast of characters for a dark pool, trade-centric comic book series.
Don't make me bring out this guy...
