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CREW Releases Report Examining the Influence of High Frequency Traders in Washington
WASHINGTON - May 13 - Today, Citizens for Responsibility and Ethics in Washington (CREW) released a new report, Rise of the Machines, detailing the growing political influence of high frequency traders in the nation’s capital. High frequency trading, a complicated and controversial method of securities trading, has begun drawing scrutiny from government regulators, prompting skyrocketing lobbying spending and campaign contributions by the industry.
CREW studied the lobbying and campaign contribution records of 48 companies that specialize in high frequency trading. Between the 2008 and 2012 election cycles, these firms’ campaign contributions soared by a staggering 673 percent, up from $2.1 million during the 2008 election cycle to $16.1 million during the 2012 cycle. Over this time period, these firms contributed more than $21 million to federal candidates, party committees, PACs, and super PACs.
Additionally, since 2008, these firms have spent more than $10 million lobbying Congress, the Securities and Exchange Commission, and the Commodity Futures Trading Commission. These companies’ total lobbying spending jumped 93 percent between 2008 and 2012, from $1.4 million to $2.7 million. The biggest single-year increase came between 2009 and 2010, while Congress debated heavily lobbied provisions of what would eventually become the Dodd-Frank Wall Street Reform and Consumer Protection Act.
“Unsurprisingly, high frequency traders upped their campaign contributions and lobbying spending at the same time Congress was debating a new law to crack down on the excesses of Wall Street,” said CREW Executive Director Melanie Sloan. “Despite all of the new regulations put forth in Dodd-Frank, these firms managed to come away unscathed. If lobbying and campaign contributions don’t directly buy influence in Washington, they certainly don’t hurt.”
High frequency traders are battling efforts to increase regulation and taxes on their industry, and they are winning support from some key members of Congress who have received industry campaign contributions. Six of the top 15 congressional recipients from these firms during the 2008, 2010, and 2012 cycles are from either Illinois or New York, both key financial centers. Other top recipients, including Majority Leader Eric Cantor (R-VA) and Rep. Jeb Hensarling (R-TX), Chairman of the House Financial Services Committee, have made statements urging caution in regulating the practice.
Sloan continued, “Let’s hope all the money high frequency traders are flashing doesn’t blind Congress to the risk of flash crashes.”