Can Trust Ever Be a Differentiator on Wall Street?

Apr 1, 2014

I have always contended that trust is a major differentiator in business. In my early career, I remember telling a colleague that I was developing a seminar entitled, Principled Leadership: Integrity in the Workplace.

My friend smiled, shook her head, and politely said, “You can’t talk about integrity and trust in corporate America. Nobody wants to hear that stuff.”

She was right, and I knew it, but I did it anyway.

People did want to hear, but they struggled with how to make trust a differentiator in their own work environments when, for many, corruption started at the top.

My contention was then, as it is now, that trust and integrity begin with one person at a time.

In the aftermath of 911, we watched in shock as our way of life began to falter. And, with the corruption of Wall Street and the subsequent recession of 2008, I suspect that we’ve all been waiting for trust and integrity to regain fashion. It’s been a long wait.

One Lone Man Takes on the Wolves of Wall Street.

My hat goes off, yet again, to 60 Minutes for courageously airing a most provocative show on what is going on in the stock market and how one young trader, Brad Katsuyama, now leader of his own exchange, is bringing trust back into the market with the opening of IEX (The Investor’s Exchange).

Mr. Katsuyama gives me hope. Due to his diligent efforts, perhaps trustworthiness will once again trend as a cornerstone of our economic system.

Seems this brilliant young trader noted that the wolves were preying on all of us and decided to do something about it. According to the recent 60 Minutes’ segment entitled, Rigged, it appears that high frequency stock trading is actually working against almost anyone who invests in the market. That includes you, me, and Aunt Myrtle, as we are all investors in our economy in one way or another.

In layman’s terms, high speed traders know what you or your trader are going to buy within a nanosecond of your first inquiry. Thanks to “robot” technology, such traders now have the upper hand to raise stock prices before the purchase is ever completed. It’s kind of like a loaf of bread going up in price while you’re at the checkout counter.

Experts in the field equate this practice to insider trading. It’s the kind of thing that you or I might go to prison for, but, apparently, if you’re a computer or someone who has access to this complex system before the other guy, (and Wall Street banks and our larger financial institutions often do) you can get away with it. And, you can make millions in the process.

Brad Kasuyama noted this obscenity and decided to investigate. I loved his remark to Steve Kroft when asked why.

“It didn’t feel right that people who are investing on behalf of pension funds and retirement funds are getting bait and switched every single day in the market.”

Can We Stand to Digest Any More of this “Bull” Economy?

High speed technology, so it seems, has definitely changed the playing field. After all, you can’t expect a complex computer system to initiate trust.

What’s so revolutionary about what Mr. Katsuyama is doing with The Investor’s Exchange? Well, he and his team have figured out a way to bypass the high frequency stock trader networks (at least for now), so that when big or small traders decide to buy or trade a stock, they actually get to do so without interference from speed traders who drive up the prices.

In describing what differentiates Mr. Katsuyama from those high speed Flash Boys, author Michael Lewis says it best, “…when someone walks in the door who is actually trustworthy, he has enormous power.”

In Brad Katsuyama’s own words, “We are selling trust. We are selling transparency.” Seems he’s hoping to build an exchange that does the right thing and that gives people like you and me a chance. Here’s hoping the wolves don’t tear him to bits.

One of the things that drove the importance of his efforts home to me was Steve Kroft’s opening remark that we are now in the fifth year of the longest and strongest bull market that our economy has ever known.

Interesting, I thought to myself. Why, then, am I still witnessing so many small business owners and their families struggling to make ends meet?

Seems like the Wolf of Wall Street has now proliferated into thousands of robot computer systems designed to keep the average American completely out of the game.

I offer you this challenge. Fight to be in the game. At the very least, be aware. view the 60 Minute segment at:

Second, watch for the upcoming book by Michael Lewis entitled, Flash Boys, that explores this very issue.

I know it’s easy to get cynical about the economy when it seems that Wall Street and our financial institutions are greasing the palms of Washington. Even so, trust is one of those crazy things that begins and ends with each one of us.

I’m trusting that financial leaders like Brad Katsuyama will continue to challenge the status quo. Maybe someday, our economic systems will then be fully restored, and with them, our trust in an economic system that has been broken for far too long.

Q: What is your response to what Mr. Katsuyama is attempting to do via IEX? You may leave a comment here.