Spirit of ‘76

Is the market rigged?

“Spirit of ‘76” by A.M. Willard. Source: Wikipedia

People are concerned about the structure of the market. Some folks looked at how stock market trades are executed and it seems like the markets are rigged, that insiders use fiber optic lines and special privileges get inside the market and game the system. It looks like they profit at the expense of the small fry.

The stock exchanges are a lot different now than they were 25 years ago, largely because new technology and new SEC regulations have forced them to be different. A few independent market-makers try to “scalp” a penny or two off of big trades, buying 1,000 shares of Apple at 200, selling them for a penny more. If they do this enough times they can make some real money. That’s what making markets is all about.

But actually there’s evidence that investing in the market has actually gotten cheaper. After all, if there are more market makers competing, consumers tend to benefit. The investment giant Vanguard studied transaction costs and found that they have declined 60 percent over the past 20 years.

Photo: Tenaciousme. Source: Flikr. CC-BY-2.0

For all their flaws, our markets remain the most open, transparent, and efficient in the world. Our commitment to free markets and free information sets an extremely high standard for everyone else. Having liquid markets lowers the cost of capital for all corporations, which is part of the reason our economy has done so well.

The more we can do to get more market information to more people, the better everyone does. July 4th is about both freedom and fairness. Our markets should try to be as free and fair as possible.

Douglas R. Tengdin, CFA

Charter Trust Company

“The Best Trust Company in New England”

By |2019-07-03T05:53:30-04:00July 3rd, 2019|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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