Federal regulators could gain more power to crack down on highly-secretive “Flash Boy” traders that use complex — and secretive — algorithms to buy and sell securities, according to a little-noticed provision in an otherwise deregulatory banking bill that could go to a vote on Tuesday.
The bill, sponsored by Sen. Mike Crapo (R-Idaho), directs the Securities and Exchange Commission to analyze whether lightning-fast traders “are subject to appropriate Federal supervision and regulation,” and to do so within 18 months, according to the text of the bill.
The pro-regulation provision sits in an otherwise Wall Street-friendly bill that loosens lending limits, capital requirements and the so-called Dodd-Frank “Volcker Rule,” which bars banks from trading with depositors’ money.
While the bill is opposed by Sen. Elizabeth Warren (D-Mass.) and others, it still is expected to pass.
The bill also cuts the number of banks under special scrutiny from about 30 to about 10 — by lifting the threshold bank asset size to $250 billion from $50 billion.
Wall Street’s biggest critics have painted the bill as a handout for big banks, who want lower capital requirements so they can make more money.
“The big banks want to use this to weaken the Volcker Rule,” Marcus Stanley, policy director at Americans for Financial Reform, told The Post — pointing out that bank profits have risen every year since the financial crisis.
But Wall Street is arguing that the Crapo bill is rolling back just unnecessary and burdensome regulations.
“Almost every provision is a refinement of something in the law,” Wayne Abernathy, an executive vice president at American Bankers Association, the lobbying group, told The Post.