Not so flash boys

Goldman's NYSE exit further stokes HFT debate

Goldman Sachs may yank its last humans from the New York Stock Exchange floor. It is planning to sell what's left of Spear, Leeds & Kellogg, according to the Financial Times. Over the years, the blue-chip Wall Street bank has moved on and invested, among other things, in electronic venues. If nothing else, the timing of the news underscores the shift to computerised trading and a reignited controversy about the flaws it may have brought to US equity markets.

Once, the likes of Spear, Leeds & Kellogg were all-powerful brokers pulling market strings and perhaps sometimes taking advantage. Nowadays, regulators, media and best-selling author Michael Lewis are suddenly focused on the potentially unfair edge enjoyed for fractions of a second by the geeks behind super-fast trading.

It's no wonder the watchdogs have been left behind. Goldman's departure from the Big Board floor - still a decent slug of the business it bought in 2000 for $6.5 billion - is an indication of the speed with which increasing connectivity and computing power have usurped human influence. Spawned in place of people are dozens of new trading platforms, clever algorithms and arbitrage opportunities that include timing advantages measured in microseconds.

Goldman, characteristically, has adapted. As well as investing in Direct Edge, which recently merged with BATS Global Markets, the investment bank is also a big customer of newcomer IEX, according to Bloomberg. Featured in Lewis' new book, "Flash Boys," IEX delays some customer orders to ensure high-frequency traders don't see them before they reach far-flung servers.

Whether such dealing really rigs stock markets, as Lewis claims, is provoking heated disputes, including a tense one between the president of BATS and the founder of IEX on CNBC on Tuesday afternoon, as well as scrutiny from regulators. And, it's but one of the technological changes in trading. Gary Cohn, Goldman's chief operating officer, recently suggested in the Wall Street Journal that controls might need to catch up. That's a debate worth having.