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Are 'Investors' Worthier Than 'Traders'?

Should the top U.S. securities regulator be looking to protect one category of market participants against another legitimate class of participants?

SEC Chair Mary Schapiro told Congress last week that when examining new market structures, the commission intends to favor the interests of "long-term investors" over those of traders.

Schapiro also indicated the SEC is uncomfortable with advances in trading technology that could hand an edge to "sophisticated traders."

The agency is looking into phenomena such as dark pools, co-location and flashes. It's considering issuing a ban on so-called flashes, which give firms that belong to exchanges an advance peek at buy and sell orders before they're made public.

Is this an appropriate posture for the SEC to take toward the evolution of market structure and technology?

Or is Schapiro exploiting the uneducated public's stereotypes of securities traders - perhaps playing to the same peanut gallery that Warren Buffett famously targeted when he indiscriminately branded all derivatives as "weapons of mass destruction"?

AUTHOReFinancialCareers News Insider Comment
  • nn
    15 December 2010

    Traders are the reasons why the investors make good returns. Example: An investor who owns a construction corporation, he knows really well about the construction industry, but what does he know about the Financial Industry? In that case, the investor depends on the trader.

  • fa
    5 October 2009

    It's like asking whether wheels are more important than the steering..
    At a macro level, investors and traders alike form a part of the financial system. They may or may not work in sync.. What percentage of investors are really long term investors.. are'nt a lot traders also long term investors? Worthiness comes from contribution and comes alike from them both.

  • De
    22 September 2009

    Lest we forget all the "smarter" and "patient" investors who just lost all their money in the past 18 months being "patient".

    This is an article by the SEC...naturally they want people to deposit money blindly into the system.

    Still not convinced? Do you know what GM, Ford, or Chrystler stock is worth if you held it for 20 or even 40 years? You'd be down 12% (and were down 40% at the hight of the panic).

    Investors and traders are counterparts. One cannot exist without the other. If an investor wants to invest (buy a stock) he would have find someone willing to sell it to him no?

    For the record, the masses are "investors"...still think they are smarter?

  • Ab
    20 September 2009

    Traders are the ones worthier than the investors because it is their initiatives, experience and expertise that accrue the revenue and the dividends of the investors. This brings us to the summery that without the traders, the investors cannot maximize dividend if and only if the they are not investing initially into the financial stream of the company.

    From Alvin :

  • TM
    17 September 2009

    yes they are. they are smarter, show the virtue of patience, can think long term, actually help not hinder the stability of the company's stock. just a few reasons.

    - TM from

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