Vanguard, Lisa, Front Running discussed on Market Advantage

Automatic TRANSCRIPT

Well first of all the human component and the electron and components still you the the the differences speed but the practices are still okay whether you're talking about a human being or a computer are an electronic trade so everything just happens quicker in these computerized markets but in terms of the power that you talk about lisa it's more of the fact that this market still condones these practices as being legitimate and okay under the guidelines that regulators and industry participants have set it's still all right to pre hedge an order so they call it which many people including vanguard says purely front running what is that pre hedge can you just describe it it basically means that if you have advanced knowledge of a client order you can kind of get ahead of it so either buy or sell but the tricky thing mayor is that if you buy or sell and you tell them you're going to do it you could potentially move the market against your client so that's pre hedging and in some circumstances it's fine in foreign exchange one thing that that volume can help determine price right in other words if you have a lot of buyers a lot of sellers that can help move the price of a particular currency versus another currency but this is just an exchange right i mean it's not as if anybody in between is actually committing their own capital to invest the sun so just also taking a step back when you were talking about i look i just want to get a sense how frequently is the exchange rate set who sets it is there it's just as sort of talk about you know how that whole dynamic plays out well the dynamic again because this market is so large because it's over the counter it's basically just a direct exchange between him and i we just we can decide exchanged euros for dollars for exactly and so that happens across this huge financial this is the biggest world's biggest financial market and that happens all the time and there's no oversight over because it's just an exchange money so that's why it's so tricky lisa because there isn't this kind of overarching regulator in one region managing what the exchange rate is it's happening you know bilaterally all the.

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