SEC to Take on Ratings Agencies, Flash Trading

It looks like the SEC will start cracking down on the ratings agencies, like Standard & Poors and Moody's.

Basically, they are going to be issuing a ruling saying that they will be treated as "experts" which creates greater liability for their opinions:

Currently, the rating agencies are not considered experts. They have argued that they are exempt from these rules because they are only providing an opinion and are protected by free speech laws.

Meanwhile, others such as auditors that companies use and cite in their public filings are considered experts and can be sued by investors. Other experts include engineers that oil and gas companies rely on to determine the amount of resources in the ground.

They are also going after the super high speed trading done by some brokerages who have placed their servers in the same room as the exchanges, allowing them to basically front run the entire market, at the expense of honest market participants.

Of course, the idea that the ratings agencies aren't experts, and until now, never were experts, just buggers the mind.

As it stands now, the exchanges grant access to buy and sell orders a few fractions of a second before they execute to the flash traders, which allows them to pick up a penny or two by buying before a big buy, or selling before a big bell.

It requires the cooperation of the exchanges, and the SEC is moving to forbid any such cooperation:

SEC commissioners unanimously voted today to seek public comment on a rule barring exchanges and trading platforms from giving clients access to information about stock orders a fraction of a second before the market. The proposal requires a second vote at a later public meeting to become binding.

“Investors that have access only to information displayed as public quotes may be harmed if market participants are able to flash orders and avoid the need to make the orders publicly available,” [SEC] Chairman Mary Schapiro said.

This never would have happened under the last guy in the White House.