High frequency trading
On April 11, Alan Kohler wrote what I thought was a very interesting article in Business Spectator about HFT (High frequency trading is cuckoo). As written, it rather put the wind up me because I thought that the ASX was preferring HFT traders over ordinary clients and ordinary brokers. In effect, the practice is a form of 'front running’, which I thought was illegal. Further, as I understood it, the practice seemed to permit HFT traders to 'double short’ if they so choose – which is not all that attractive for ordinary shareholders in the current shaky market. I was also concerned if special arrangements had been made in respect of ASX shares – in other words, are ASX shares in or out of the deal? You can imagine my surprise when I read Fil Mackay's piece in Eureka on May 7 saying that we don't need to worry yet because HFT is not going on in Australia! Who’s right – Alan or Fil, or are they both right and I've simply misunderstood it all?
– T Holt
Editor’s response: High Frequency Trading is certainly going on in Australia as described, but the distinction at the moment is the manner in which high-speed traders obtain the information on future trades. Fil Mackay explains that in the US “flash orders” give a 0.1 second 'heads up’. Alan Kohler, on the other hand, explains that in Australia “sophisticated programs can pick up patterns that indicate when a reasonably large order has been placed”. This is less specific, but still disadvantageous to some Australian investors.
Regarding James Kirby’s assessment of the budget superannuation outcomes, it is difficult to know where to begin. Let’s look at the real world instead of numbers. Firstly, few savers close to retirement will be affected. If you are close to or at retirement and have less than $500K in your super fund, you are highly unlikely to have the capacity to contribute $25K pa to your fund, never mind $50K. Secondly, “Consternation in financial planning circles”. Excuse me while I grab a hanky. Any consternation results from a potential loss of advice fees and minimal increase in asset fees. The financial planning industry is well aware of point one. “The delay will still be a major disappointment to the financial planning sector”. So sad! What about the people who have had their retirement savings decimated over the last few years and have little or no capacity to add to them? The proposition that high contribution levels can help these people is a fiction to all except high income earners who don’t need taxpayer-funded concessions anyway. Contribution tax increased to 30% for the over $300K earners. Bugger. If their taxable income is still $300K after all the tax planning advice and opportunities available to them, then their superannuation contributions should be taxed at their marginal rate. There is no identifiable reason to allow them to shelter their savings in the concessionally-taxed superannuation/pension environment at the expense of people who really need and deserve help. The Labor government just doesn’t get it. Sadly it seems, neither does James.
– A Abbott
James Kirby’s response: I would always assume that someone close to retirement would at least be aspiring to contribute more than $25,000. That they have not accumulated $500,000 would hardly be surprising considering the below-average returns we have had in recent years. Separately, I agree we need not cry tears for planners flummoxed by rule changes, but they are entitled to ample warning on major changes – or, worse still, reversals – in regulation.
I refer to Robert Gottliebsen's Super loses its shine, from May 11. I took his advice and emailed UBank about their falling deposit rates. I also asked why their super fund deposit rates were lower than their ordinary rates (is this normal?) This is the reply, which I will follow up, as it is no more than spin:
“Thanks for getting in touch. Just to confirm the reason for the difference in the rate for the personal and Self Managed Super Fund (SMSF) accounts are because they are two different products with differing features. UBank certainly aims to provide our customers with sustainable competitive rates on both our Self Managed Super Fund (SMSF) and personal accounts. We will certainly be more than happy to pass on your feedback and apologise in this instance UBank has not met your expectations. We certainly hope that going forward, your future interactions with UBank are of a more positive nature'¦”
– R West