High-Frequency Trading, Order Types, and the Evolution of the Securities Market Structure: One Whistleblower's Consequences for Securities Regulation

Abstract

This Article analyzes — through the lens of securities regulation — the contributions of Haim Bodek, an advocate of reforming the securities market structure and a whistleblower who brought attention to several questionable practices of high-frequency traders and trading venues, including their use of complex and, arguably, nontransparent order types. More specifically, the Article addresses several key issues raised and discussed by Haim Bodek, such as the order type controversy and its implications for high-frequency traders, the status of self-regulatory organizations, trading obligations and privileges of market makers, and the duty of best execution, and aims to fit these issues into the evolving boundaries of civil liability under federal securities law and the reach of a private right of action.

Keywords: high-frequency trading, order types, civil liability, regulatory immunity, market makers, best execution

JEL Classification: D82, G18, K22