SEC chair: Markets not 'rigged'

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Are U.S. financial markets rigged, as author Michael Lewis argues in his recently published book Flash Boys? Not in the view of Securities and Exchange Commission Chair Mary Jo White.

'The markets are not rigged. The U.S. markets are the strongest and most reliable in the world,' White testified Tuesday during a House Financial Services Committee hearing.

The session was convened to review the financial regulatory agency's annual budget proposal. But along with funding questions, several committee members asked White whether high-frequency traders who dart in and out of stocks in fractions of a second have created an unlevel playing field for other investors.

White cited the SEC's ongoing analysis of numerous market structure issues, including high-frequency trading. 'We're data-driven and disciplined, which I think is the right way to do a review,' said White, indicating no conclusions have been reached as yet.

'It's clearly an issue ... we're quite focused on,' she said.

But, pressed directly about Lewis' argument by by Rep. Scott Garrett, R-N.J., White defended the reputation of U.S. financial markets - even as she stressed they're not 'perfect.'

Garrett and other Republican members of the panel applauded the SEC's handling of the review and White's response. But several committee Democrats seemed unconvinced.

'I know people now who don't want to trade in the markets' because of concerns about high-frequency trading,' said Rep. Carolyn Maloney, D-N.Y.

White said several analyses have shown that smaller, retail trading customers have benefited from faster execution and smaller bid-and-ask spreads on stock prices since the advent of high-frequency trading.

But any public perception that markets might not treat all traders equitably, even if not grounded by data evidence, 'in and of itself' represents 'a significant issue,' she said.

'We could not be doing a more intensive review of all the issues,' said White.