Nobel laureate Stiglitz blocked from SEC panel after faulting high-speed traders


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Joseph Stiglitz, Nobel prize-winning economist and professor of economics at Columbia University. Joseph Stiglitz, Nobel prize-winning economist and professor of economics at Columbia University.


Joseph Stiglitz, the Nobel laureate economist who called for a tax on high-frequency trading, has been blocked from a government panel that will advise regulators on issues facing U.S. equity markets, according to people familiar with the matter.
Stiglitz’s rejection shows the partisan infighting that has bogged down Securities and Exchange Commission Chair Mary Jo White’s plan to set up a panel of experts to advise the agency on topics ranging from rapid-fire stock trading to dark pools.
Republican Commissioner Daniel Gallagher opposed Stiglitz’s nomination in recent weeks as White sought to complete the list of participants, according to two people who asked to not be identified because the deliberations were private. Democratic Commissioner Luis Aguilar had pushed for Stiglitz, who has said high-frequency trading isn’t good for financial markets and should be curbed, possibly through a tax.
“I think they may not have felt comfortable with somebody who was not in one way or another owned by the industry,” Stiglitz said in a phone interview.
More opposition
White said Jan. 3 that she will announce the members of the advisory market-structure committee in the coming days -- six months after she first proposed the idea together with a blueprint for renewed market oversight. Each of the five commissioners -- two Democrats, two Republicans and White, an independent -- was allowed to nominate one person to the panel. The commission then had to come to agreement on the final list, which is expected to have more than 15 members.
Gallagher declined to comment on the panel, as did Gina Talamona, a spokeswoman for White.
Stiglitz, 71, wasn’t the only nominee that sparked wrangling. Earlier in the process, SEC Commissioner Michael Piwowar, a Republican, opposed the involvement of TIAA-CREF Chief Executive Officer Roger Ferguson, according to two other people familiar with the matter. Ferguson, whose firm manages hundreds of billions of dollars in retirement savings, is a former Federal Reserve vice chairman. He is married to former SEC Commissioner Annette Nazareth, who now advises some of Wall Street’s biggest banks on regulatory issues.
Concern Over Fed
Piwowar wouldn’t discuss specific nominees but said that he opposed “a former Federal Reserve governor” who was included in an early list of candidates prepared by the SEC’s staff. Mike Tetuan, a spokesman for TIAA-CREF, said Ferguson declined to comment.
“My concern was about the institution of the Federal Reserve and not any particular individual,” said Piwowar, who has complained about the Fed’s role regulating companies overseen by the SEC. “I didn’t want to give them more undue influence in areas in which they have no particular knowledge or expertise.”
The panel is expected to include representatives of Wall Street brokerage firms and academic researchers. IEX Corp. Chief Executive Officer Brad Katsuyama and former Senator Ted Kaufman of Delaware are expected to be named to the panel, two people with knowledge of the matter said.
Katsuyama garnered attention as a key figure in “Flash Boys,” Michael Lewis’s 2014 book about high-frequency trading. He started the IEX trading platform with the aim of leveling the playing field for investors by curbing the pace of buying and selling -- eliminating opportunities for the fastest firms to trade in front of slower ones. He has said the government should consider forcing greater transparency of trading venues’ operations.
Stalled enforcement
IEX spokesman Gerald Lam declined to comment about Katsuyama’s participation. Kaufman didn’t immediately respond to a phone call and e-mail seeking comment.
High-frequency trading, which uses computer algorithms to buy and sell large numbers of shares in fractions of a second, accounts for more than 50 percent of U.S. trading volume.
The dust-up over Stiglitz is emblematic of the frequent conflict among commissioners that has slowed progress on regulatory policy and enforcement matters under White. A recent case against Bank of America Corp. was stalled for three months as commissioners, divided along political lines, fought over additional penalties that could have expelled the bank from the profitable business of raising money for private companies.
“Financial markets are important and I have been worried about the way they have been working and whether they are serving the American economy,” Stiglitz said. “I was willing to serve. The next thing I knew, I was told you didn’t get it.”
Aguilar confirmed that he recommended Stiglitz but declined to talk about the panel’s membership. “I thought he would do a fantastic job as a Nobel-winning economist and someone who is well-informed about how the market structure works,” Aguilar said.
A former chief economist of the World Bank, Stiglitz argued in an April speech that high-frequency trading can make markets less efficient while driving other investors to cloak their orders by placing them away from exchanges using dark pools, leading to less transparency.

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