Agreed, he seems to be mixing up a bunch of stuff here.
His rant about HFT seems misplaced : The market rules allow for robotic trades that whittle the bid-ask spread down to wafer-thin margins. Investors generally benefit from the greater liquidity and lower transaction spreads - compared to the situation before the minimum price increment was set so low.
But he may have a (related) point when he complains that the bid-ask spread is now determined by machines (and is driven to zero) : Previously, stockbroking/marketmaking was a much more cozy operation, since there was a minimum spread that gave the occupation a base-line profitability. That's gone now. What's also been swept away is the research function that market-making (sellside) firms once provided as part of the service. There's less margin trading a single share, so there's much less incentive to try and get clients to trade those shares with you : Much better to get them to trade more exotic products...
Also, regulations have stopped sell-side research people getting paid for the investment banking (money raising) part of the business. Previously, research people would follow a wide universe of stocks, and then use that as a wedge to get the (lucrative) investment banking business for their firm - think of it as salary for stock recommendations, bonus for banking. Now the cross-pollination thing is illegal, and what's basically happened is that any half-decent stock analyst gets hired away from the sellside firm by hedge-funds (where they can get paid doing what they love).
Another element (the regulation FD, and Sarbanes-Oxley) part increase the cost of being a listed company for the companies themselves. RegFD means that they have to tell investors any news simultaneously (on the face of it a good thing, since it makes it clear that inside-information, or front-runnable information/whispers are a no-no). However the way it is implemented makes it a lawyer-infested process to release any information. Walking past a CFO in the street and asking "How's it going?" now results in "You need to speak to my Investor Relations department". And that transition now means that information is less timely and less comprehensive information (since the IR people are incentivized to be cautious, rather than help investors understand the underlying business).
Sarb-Ox was also regulation founded on good intentions : The Board/CEO has to represent that the investor communications are full and fair (my understanding) - with the downside of going to jail. The downsides are two-fold (1) the most secure way of communicating for a CEO is to say "Here are the audited financials, I'm not saying a word more", and (2) the people that this was intended to prevent from scamming the public are largely unaffected (since they live in a world of scamming and lying anyway : what does an extra law against it matter?)
Anyway : The basic (IMHO correct) ideas revolve around the unintended consequences of new regulations [that are almost always devised to tackle the last catastrophe rather than anticipate the next ones]. The rant about HFT seemed out-of-place.
His rant about HFT seems misplaced : The market rules allow for robotic trades that whittle the bid-ask spread down to wafer-thin margins. Investors generally benefit from the greater liquidity and lower transaction spreads - compared to the situation before the minimum price increment was set so low.
But he may have a (related) point when he complains that the bid-ask spread is now determined by machines (and is driven to zero) : Previously, stockbroking/marketmaking was a much more cozy operation, since there was a minimum spread that gave the occupation a base-line profitability. That's gone now. What's also been swept away is the research function that market-making (sellside) firms once provided as part of the service. There's less margin trading a single share, so there's much less incentive to try and get clients to trade those shares with you : Much better to get them to trade more exotic products...
Also, regulations have stopped sell-side research people getting paid for the investment banking (money raising) part of the business. Previously, research people would follow a wide universe of stocks, and then use that as a wedge to get the (lucrative) investment banking business for their firm - think of it as salary for stock recommendations, bonus for banking. Now the cross-pollination thing is illegal, and what's basically happened is that any half-decent stock analyst gets hired away from the sellside firm by hedge-funds (where they can get paid doing what they love).
Another element (the regulation FD, and Sarbanes-Oxley) part increase the cost of being a listed company for the companies themselves. RegFD means that they have to tell investors any news simultaneously (on the face of it a good thing, since it makes it clear that inside-information, or front-runnable information/whispers are a no-no). However the way it is implemented makes it a lawyer-infested process to release any information. Walking past a CFO in the street and asking "How's it going?" now results in "You need to speak to my Investor Relations department". And that transition now means that information is less timely and less comprehensive information (since the IR people are incentivized to be cautious, rather than help investors understand the underlying business).
Sarb-Ox was also regulation founded on good intentions : The Board/CEO has to represent that the investor communications are full and fair (my understanding) - with the downside of going to jail. The downsides are two-fold (1) the most secure way of communicating for a CEO is to say "Here are the audited financials, I'm not saying a word more", and (2) the people that this was intended to prevent from scamming the public are largely unaffected (since they live in a world of scamming and lying anyway : what does an extra law against it matter?)
Anyway : The basic (IMHO correct) ideas revolve around the unintended consequences of new regulations [that are almost always devised to tackle the last catastrophe rather than anticipate the next ones]. The rant about HFT seemed out-of-place.