All Articles Finance Modern Money ICYMI - August 30

ICYMI – August 30

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Modern Money

A collection of stories from SmartBrief publications and around the web…

M.I.T. economist dissects financial innovation: Massachusetts Institute of Technology economist Alp Simsek has published a new paper that challenges the view that financial innovation reduces risk. “Financial innovation might be good for other reasons, but this general kind of belief that it reduces the risks in the economy is not right,” Simsek explains.

Fodder for the Audit/Abolish the Fed movement: Ron Paul’s views of the Federal Reserve might be on the fringe, but Ben Bernanke’s crew sure doesn’t seem to be doing itself any favors. According to the Huffington Post, a survey of Fed employees found “a workforce that is demoralized, and an institution where teamwork is nonexistent, innovation and creativity are discouraged and employees feel underutilized.” Ouch. It’s a good thing such an organization wasn’t responsible for dispensing $1.2 trillion or so in emergency loans to Wall Street. Oh, wait … nevermind.

Study shows high-frequency trading doesn’t boost volatility, but critics question methodology: A study commissioned by the Futures Industry Association and conducted by two Vanderbilt University professors (boy … tough loss to Ole’ Miss last night!) shows that there has been no increase in global market volatility correlated with high-frequency trading. “We don’t deny that high-frequency trading can cause temporary problems,” said Nicolas Bollen, one of the study’s authors. “What we do show is that at typical measurement frequencies — daily and monthly, for example — volatility levels do not appear to be affected by the rise in high-frequency trading.” Some critics, however, have questioned the methodology of the study, which used five-minute intervals to measure HFT’s effect on the markets.

Milken Institute weighs in on the impact the JOBS Act will have on the private funding market: Daniel Gorfine, director of financial markets policy and legal counsel in the Washington office of the Milken Institute, lauds the SEC’s regulatory restraint with regard to the JOBS Act and the private funding market. However, Gorfine also warns the industry not to blow its chance to keep regulators at bay. “Given the attention that private capital markets will receive from regulators as they await comment on their new proposed regulations, the industry does not have long to demonstrate that it can take care of itself and its investors. If it succeeds in doing so, however, internet-based democratization of finance will only gain momentum.”