What’s Worse Than Ticket Scalpers? Stock Scalpers.

Sarah Anderson Co-Editor, Inequality.org

nternet bots immediately snapped up Beyonce’s presale tickets last year. And when the resale price rose above $1,000, the Beyhive was mighty peeved.

Ticket scalpers are indeed frustrating. But their Wall Street cousins — what UMass-Amherst professor Douglas Cliggott calls the “stock scalpers” — are far more dangerous.

Like online ticket scalpers, these financial predators use advanced technology to cheat the rest of us. For huge sums, they buy the privilege of locating their computer servers as close as possible to market exchanges. This allows them to get trading information a split-second faster than traditional investors.

So when a mutual or pension fund makes a trade, the stock scalpers see that trade on its way to the market. “They hop in front of it, buy it, and bid up what we want to buy and sell it back to us at a higher price,” explains Cliggott, a former JPMorgan Chase managing director.

The scalpers do this thousands of times a day, using computers programmed with algorithms that have no connection to the real economy. This “high frequency” trading makes up the majority of today’s market activity.

Many financial experts, including a former CFTC chief economist, have warned that high speed trading siphons profits from traditional investors. For the minority of U.S. workers who have any money at all in a retirement fund, that’s a bigger problem than missing out on a Beyonce concert.

Even more disturbing is the risk the high-speed traders pose for the global financial system. John Fullerton, another former JPMorgan Managing Director, points out that high frequency traders vanish from the market in a flash in times of crisis. “This can trigger a cascading effect as real money investors pull back in self-defense and at times flee in panic,” explains Fullerton, who currently leads the Capital Institute.

Jean-Philippe Serbera, a financial markets expert at Sheffield Hallam University, views the threat of a major “flash crash” as more likely today than during the relatively calm bull market of the past several years. “In a more depressed market, where there’s inevitably more volatility and traders are more downbeat,” Serbera says, “the worry is that flash crashes are more likely to get out of hand — possibly causing contagion around the world.”

There’s an easy solution to these problems: tax the stock scalpers.

Posted In: Allied Approaches

Union Matters

Raise the Wage!

From the AFL-CIO

It’s been a decade since the federal minimum wage was increased—the longest period in American history without an increase. In that time, the cost of living has increased and working families have struggled to make ends meet. The Raise the Wage Act would finally bring the federal minimum wage up to $15 an hour.

The House of Representatives is voting tomorrow on the Raise the Wage Act, and we need to make sure lawmakers know where workers stand. Will you show your support and ask your friends to call their representatives?

One in 9 workers in the U.S. is in poverty—even when working full time and year-round. Passing the Raise the Wage Act as it stands would empower working families in need and build an economy that works for everyone.

Share our #RaisetheWage message on social media right now.

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